Serbia: Economic and Political Overview
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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 when growth was estimated at 2.3% by the Statistical Office of Serbia, with domestic demand as the main source of growth. Amid ongoing weakness in export markets, the IMF forecasts a GDP increase of 2.4% for 2023, before growth revives to 3.5% in 2024 as monetary policy is eased, lower inflation reduces pressure on disposable incomes and external conditions improve.
The general government budget recorded a deficit of 3.1% of GDP in 2022 (from 4.1% one year earlier), lower than the target of 3.9% set in the revised budget adopted in November, as inflation fuelled tax revenue and contained current expenditure growth, partly balancing net lending of around 1.8% of GDP to cover losses in the energy sector. The 2023 budget projects a 3.3% deficit with total revenue of EUR 15.75 billion, 7.8% more than in the amended 2022 budget. Tax revenues are planned in the amount of EUR 13.61 billion, and non-tax revenues in the amount of EUR 1.71 billion. The public debt-to-GDP ratio stood at an estimated 54.4% in 2022 and should follow a downward trend in 2023 (50.3%) and 2024 (47.3% - IMF) thanks to continued primary surpluses. Inflation reached an 11-year high in December 2022 and averaged 11.5% over the year. Due to the expected increase in inflation in the 1st quarter of 2023, the National Bank of Serbia continued with a strong increase in the reference interest rate by 50bp to 5.0%. For the year as a whole, inflation is expected to remain high but somewhat moderate to 8.3% in 2023, with a more consistent decrease the following year (4.2% as per the IMF projections). 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 normalisation 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 ageing population represent other challenges that the country will have to face in the long term.
Serbia's unemployment rate, relatively low compared to its neighbours in the Balkans, remains significantly higher than the European average: in 2022, it stood at 9.9%, with a marginal decrease expected in the next couple of years (9.5% in 2024 as per the IMF projections). 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 modernise infrastructure and support investment in the business community. Eurostat estimates that the number of people at risk of poverty fell further to 29.8% in 2020 (was 39.5% five years earlier), while the GDP per capita (PPP) stood at USD 24,084 in 2022 (IMF).
| Main Indicators | 2020 | 2021 | 2022 | 2023 | 2024 |
| GDP (billions USD) | 53.34 | 63.07 | 62.72 | 68.68 | 75.63 |
| GDP (Constant Prices, Annual % Change) | -0.9 | 7.4 | 3.5 | 2.7 | 3.5 |
| GDP per Capita (USD) | 7,700 | 9,178 | 9,164 | 10,075 | 11,140 |
| General Government Balance (in % of GDP) | -5.9 | -4.3 | -2.6 | -1.1 | -0.5 |
| General Government Gross Debt (in % of GDP) | 58.7 | 57.9 | 54.4 | 50.3 | 47.3 |
| Inflation Rate (%) | 1.6 | 4.1 | 11.5 | 8.3 | 4.2 |
| Unemployment Rate (% of the Labour Force) | 10.1 | 10.1 | 9.9 | 9.7 | 9.5 |
| Current Account (billions USD) | -2.20 | -2.77 | -5.24 | -4.78 | -3.79 |
| Current Account (in % of GDP) | -4.1 | -4.4 | -8.4 | -7.0 | -5.0 |
Source: IMF – World Economic Outlook Database, October 2021
Serbia has a workforce of 3.16 million out of its 6.8 million population. The agricultural sector accounts for 6.3% of the country's GDP (its share has been decreasing in the past years), employing nearly 16% 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 fell by 8% in 2022 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 27% 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 13% of GDP. According to the national statistical institute, Serbia's industrial production increased by 1.5% year-on-year in 2022, while manufacturing grew by 1.7%.
Services make up the main sector of activity and account for 51.4% of Serbia's GDP, employing 57% of the workforce. The IT industry is one of the fastest-growing, same as for the tourist sector which represented 6.9% of GDP before the pandemic. Following a decline due to the COVID-19 crisis, tourist overnight stays increased by 37.5% y-o-y in 2022. In the same year, retail trade turnover recorded grew by 6.4%, while the wholesale trade turnover increased by 19% in nominal terms (Statistical Office of the Republic of Serbia). Concerning the banking sector, foreign banks account for 86% of the market, while state-owned banks and domestic private banks account for 7% each (EBF – latest data available).
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
| Employment By Sector (in % of Total Employment) | 15.6 | 27.4 | 57.0 |
| Value Added (in % of GDP) | 6.3 | 25.0 | 51.4 |
| Value Added (Annual % Change) | -5.7 | 8.6 | 8.5 |
Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.
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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.}}
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
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.
Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024
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Latest Update: March 2023
