Economist and academician Pavle Petrović argues that Serbia’s nearly 4% economic growth is primarily driven by the state, while the domestic private sector remains heavily restrained and stifled. He describes Serbia as a “captive society” dominated by state capitalism.
Petrović highlights that about two-thirds of total investments in Serbia come from state funds and foreign direct investments closely tied to the state, while less than one-fifth originate from the domestic private sector. The domestic private sector’s contribution is so limited that households invest almost as much as it does.
He points to low entrepreneurial activity as a major problem, evidenced by Serbia having three times fewer newly formed companies than other Central and Eastern European countries. Petrović attributes this to an environment hindered by ineffective laws, weak institutions, and corruption, which prevent large-scale private entrepreneurship.
The state compensates by driving growth through massive investments and foreign capital. However, this growth is concentrated in just three sectors — construction, mining, and IT — which represent only about one-sixth of the economy. These sectors grow at around 10%, while the remaining five-sixths of the economy grow below 3%.
Petrović warns that this skewed growth is unsustainable, especially as mining is being pushed to its limits. He notes that the mining boom, driven mainly by copper exploitation, generates limited benefits beyond wages and taxes, with little impact on technological advancement or the broader economy. The export of mostly unprocessed ore limits value addition and innovation.
Ultimately, Petrović concludes that Serbia’s economic growth model is fragile, dependent on a few sectors controlled or heavily influenced by the state, and lacks a broad-based private sector foundation necessary for sustainable development.
