Serbia flag Serbia: Economic and Political Overview

The economic context of Serbia

Economic Indicators

The economy of Serbia experienced rapid growth from 2001–2008, although the global financial crisis hit hard on the country’s economy, showing its structural weaknesses and the need for a full transition to a market economy. Despite turning into negative territory in 2020 as a consequence of the COVID-19 crisis, Serbia’s GDP rebounded strongly in 2021 (+7.4%) and continued its positive trend in 2022 (+2.3%). According to the Statistical Office of Serbia, GDP grew 2.5% in real terms in 2023, thanks to stronger net exports and investments and revived private consumption in light of a decrease in inflation. The IMF forecast indicates that economic growth is set to rise to 3% in 2024 and further to 4.5% in 2025. This surge is primarily attributed to the increased pace of private consumption growth, facilitated by reduced inflation, and a rise in investment activity. Following the significant positive impact observed last year, the contribution of net exports to growth is anticipated to remain generally neutral in both 2024 and 2025.

According to governmental figures, the general government budget deficit stood at 2.3% of GDP in 2023, from 3.2% one year earlier, amid lower capital transfers to state-owned enterprises within the energy sector and augmented revenue from increased excise duties, which were counterbalanced by discretionary expenditure measures encompassing heightened subsidies for agriculture, one-time lump-sum payments to pensioners and families with children, an exceptional pension increase, and additional wage increments in education and health sectors. Buoyed by the economic rebound and a continued reduction in energy-related capital transfers, the deficit is predicted to steadily diminish throughout 2024 and 2025. After dropping to 51.3% in 2023, primarily due to substantial nominal GDP growth, the general government debt-to-GDP ratio is also projected to progressively decline further, chiefly driven by the denominator effect amid sustained robust growth in nominal GDP, reaching 47.4% in 2025 (IMF). The estimated annual inflation rate hovered around 12% in 2023. The EU Commission expects it to revert to single digits in 2024 and to align within the Central Bank's target range by 2025. Meanwhile, negotiations for EU membership continued: Serbia has met the criteria to open new sets of chapters in the EU accession talks (including the Green Agenda and sustainable connectivity), although the normalization of relations with Kosovo is slow and those with Croatia and Bosnia-Herzegovina are complicated. The negotiations are expected to end in 2024. The main challenges that Serbia faces are: stagnant household incomes, a need for private-sector job creation and structural reform of public enterprises as well as strategic reforms in the public sector. An ineffective judicial system, a high level of corruption and an aging population represent other challenges that the country will have to face in the long term.

Serbia's unemployment rate, relatively low compared to its neighbors in the Balkans, remains significantly higher than the European average: in 2023, it stood at 9.1%, with a marginal decrease expected in the next couple of years (8.8% in 2025 as per the IMF projections). However, in comparison to 2022, average salaries, along with taxes and contributions deducted, experienced a nominal increase of 15% and a real increase of 2.6% in 2023 (Statistical Office of Serbia). The standard of living of the Serbian population remains significantly below the EU average and the country's informal sector is substantial. However, the authorities have the support of the EU and international financial institutions to modernize infrastructure and support investment in the business community. Eurostat estimates that the number of people at risk of poverty fell further to 21.2% in 2021 (latest data available), while the GDP per capita (PPP) stood at USD 23,911 in 2022 (World Bank).

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 63.5075.0281.6988.9195.52
GDP (Constant Prices, Annual % Change) 2.32.03.04.54.0
GDP per Capita (USD) 9,52811,30112,35713,50214,564
General Government Balance (in % of GDP) -1.4-2.0-2.0-1.3-1.3
General Government Gross Debt (in % of GDP) 53.551.349.647.445.2
Inflation Rate (%) n/a12.45.33.53.2
Unemployment Rate (% of the Labour Force) 9.49.19.08.88.7
Current Account (billions USD) -4.35-1.76-2.64-3.15-3.59
Current Account (in % of GDP) -6.9-2.3-3.2-3.5-3.8

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

Serbia has a workforce of 3.37 million out of its 6.8 million population. The agricultural sector accounts for 6.5% of the country's GDP (its share has been decreasing in the past years), employing nearly 14% of the workforce (World Bank, latest data available). Serbia has 3.4 million hectares of agricultural land. Its continental climate with cold winters and hot humid summers is ideal for intensive fruit production. Fruit production consists mainly of apples, grapes, plums, peaches, pears, and berries. Recently, Serbia has been widely using fruit processing to obtain products like brandies, jams, juices, and compotes. The main crops are maize and wheat, together with barley, oat, and rye. Figures from the national Statistical Office show that agricultural production volume grew 9% in 2023 compared to one year earlier.

Serbia has significant quantities of coal, lead, zinc, copper, and gold, but the lack of investment, which has affected the mining sector for several years, prevents the country's economy from benefiting from this wealth. The industrial sector is likewise in need of modernization and foreign investment, currently contributing one-fourth of the country's GDP and employing 29% of the workforce. The country’s main industries include automotive, food processing, chemicals, base metals, furniture, pharmaceuticals, machinery, sugar, tires, and clothing. The manufacturing sector is estimated to account for 14% of GDP. According to the national statistical institute, Serbia's industrial production increased by 2.4% year-on-year in 2023, while manufacturing grew by 0.5%.

Services make up the main sector of activity and account for 52% of Serbia's GDP, employing 57% of the workforce. The IT industry is one of the fastest-growing, the same as for the tourist sector: the number of foreign tourists who visited Serbia in 2023 grew by 20% to 2,134,305, while that of overnight stays spent by foreign tourists increased by 13%. In the same year, retail trade turnover decreased by 1.8%, while the wholesale trade turnover dropped by 1% in nominal terms (Statistical Office of the Republic of Serbia).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 13.9 28.9 57.1
Value Added (in % of GDP) 6.8 23.1 52.4
Value Added (Annual % Change) -8.3 -0.7 4.5

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
67,2/100
World Rank:
54
Regional Rank:
30

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
6.04/10
World Rank:
54/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Country Risk

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Sources of General Economic Information

Ministries
Ministry of Finance
Ministry of Economy
Statistical Office
Statistics Office of Serbia
Central Bank
National Bank of Serbia
Stock Exchange
Belgrade Stock Exchange
Economic Portals
The World Bank in Serbia
 

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Latest Update: May 2024

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