A N A LY S I S ECONOMY AND FINANCE INDUSTRIAL POLICY IN SERBIA Towards major reliance on internal sources of growth Milica Uvalić October 2021 Industrial policy has acquired a particularly important role af­ter the strong impact of the 2020-21 COVID-19 pandemic and the urgency of the green and digital transitions, placing many new issues on the agen­da that will require long-term planning and strategic action by governments. Serbia will also need to adapt to this new agenda, by adopt­ing a new type of industrial policy. Rather than focusing primarily on attracting foreign investors, Serbia’s post-pan­demic economic recovery will have to rely much more on in­ternal sources of growth- in­cluding human capital, SMEs, entrepreneurship- since some of the main external sources that have fuelled growth may soon dry up. Instead of a growth model that relies primarily on out­ward processing FDI with lim­ited linkages to the domestic economy, Serbia needs to im­plement a more elaborated industrial policy that would promote the digital and ener­gy transition, as this is likely to facilitate Serbia’s potentially best performing sectors to be integrated into global value chains.