At the start of 2025, Serbia’s economic growth slowed from 3.3% in the last quarter of 2024 to 2% in the first quarter of 2025, according to Milojko Arsić, professor at the Faculty of Economics in Belgrade. He estimates annual growth around 3%, significantly below the planned 4.2%, assuming domestic demand recovers.
Key sectors such as construction, trade, and tourism are contracting, while IT, agriculture, and finance show growth; industry remains stable. Investments are declining, public spending stagnates, and private spending grows slowly. Exports increase but at a slower pace than imports, leading to persistent trade deficits.
Arsić highlights two main internal factors impacting the economy: ongoing political instability causing investment uncertainty and postponed consumption, and structural weaknesses including low productivity in certain industries like textiles and cables, as well as poor management of public enterprises — evident in a sharp drop in electricity production.
Employment has stagnated, and real wage growth is slowing but remains high. The rise in unit labor costs since 2018 by 33% has hurt Serbia’s price competitiveness, mirroring trends in Central and Eastern Europe.
Revised data on exports show stronger growth than previously reported, reducing trade and current account deficits, though these remain high. Foreign direct investment fell over 50% in Q1 2025, influenced by political issues, EU stagnation, and a high comparison base from 2024.
Inflation has declined gradually, reaching 3.8% year-on-year in May, driven by falling energy prices and restrained domestic demand. Risks remain if energy prices rise or agricultural output suffers.
Public finances show slight revenue growth but rising expenditures, with a fiscal deficit likely close to the planned 3%, though risks exist for overshooting.
Monetary policy remains active to stabilize the dinar, with household lending increasing and interest rates generally declining.
Experts stress the importance of Serbia maintaining diverse international economic relations rather than focusing narrowly on certain partners. Challenges include large trade deficits with China and the need for better trade terms.
Long-term economic growth hinges on improving institutions, rule of law, property rights, reducing corruption, enhancing education, research, and innovation, and fostering a more modern, technology-driven production base. Consistency across economic policies, including exchange rate management, is also vital.
Upcoming projects like Expo 2027 may boost growth but also risk diverting funds from essential infrastructure.
Academician Pavle Petrović notes skepticism about a shift towards private sector-led growth, citing weak institutions, corruption, and lack of property protection as persistent barriers. Despite government reforms outlined in the Fiscal Strategy, institutional collapse since 2014 undermines progress.
