Economic Outline

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).

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