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KOPAONIK, Serbia, March 8 (Reuters) - Serbia's economy is expected to grow over three percent this year but Belgrade must continue to sell ineffective state firms and invest in education and healthcare to boost growth in the next decade, a World Bank regional director said on Wednesday.
Serbia is trying to reform its way out of the legacy of the Balkan wars of the 1990s, socialist mismanagement and corruption but, despite reforms that have improved its finances, the economy is still burdened by loss-ridden state enterprises.
The European Union candidate country has recovered from a triple dip recession after the global financial crisis and devastating floods in 2014, and its economy grew by around 2.7 percent last year.
The International Fund sees it growing 3 percent in 2017, while the central bank said growth will be around 3.5 percent.
"What we are expecting is that (2017) growth will rise... around 3.3 percent to 3.5 percent," Ellen Goldstein, the World Bank’s Country Director for the Western Balkans told Reuters on the sidelines of a forum at the Kopaonik mountain resort.
"We are seeing... a nice steady progression upwards and we feel that growth can rise to about 4 percent from 2020 and then further," she said.
In addition to Serbia, the Western Balkans also includes Albania, Bosnia, Kosovo, Macedonia and Montenegro. Goldstein said the lender was also seeing a "fairly nice projection upwards" for the entire region.
"Serbia is... about a half of the economy of the Western Balkans, so wherever Serbia goes, it will have an effect on the average growth of the Western Balkans as a whole," she said,
In 2015, the World Bank and its financial arm, the IFC, approved $2.2 billion in lending for Serbia to foster competitiveness and growth between 2016 and 2020, including the disposal of loss-ridden and heavily subsidised state firms.
So far the government has sold its only steel mill, Zelezara Smederevo, to China's Hesteel.
It wants to sell RTB Bor copper maker and the indebted drugmaker Galenika. Petrochemical plants are also slated for sale, while the EPS power utility must be restructured.
"These are a big fiscal drain, as well as a deterrent for private investors," she said.
Goldstein added that Serbia must also focus on reforming its slow and obsolete health and education systems and public administration so they are adapted to the labour market and are more efficient in the use of resources.
"This is the new frontier," she said. (Reporting by Aleksandar Vasovic; Editing by Ken Ferris)