In 2024, Serbia’s average interest rate on borrowing stood at 4.1%, significantly higher compared to the European Union’s average of 2.3% and the Eurozone’s 2.2%.
According to data from the AMECO database, only Hungary (6.9%), Poland (4.5%), and Romania (4.2%) had higher borrowing costs than Serbia, while most other European countries paid interest rates that were half or even a third of Serbia’s rate.
What does this mean in practice?
Both the government and citizens take out loans for various needs, including infrastructure projects such as schools, hospitals, roads, and railways. In Serbia’s case, significant investments are also required for the Specialized Exhibition “Expo 2027.” The higher the interest rate, the more money the government has to allocate just for paying off the debt, leaving less for specific projects and public needs.
Serbia among countries with the most expensive borrowing costs
Although Serbia’s public debt is relatively low—under 50% of GDP, unlike many European nations—it still faces high borrowing costs.
Generally, banks and investors consider lending to countries with economic challenges, political instability, or unpredictable economic policies as riskier. This results in higher borrowing costs for Serbia, as markets demand a higher price to cover the risk.
Nenad Gujaničić, chief broker at Momentum Securities, explained to Danas that the interest rate a country pays depends on several factors.
“When it comes to countries, borrowing costs are not only affected by the public debt-to-GDP ratio, although a lower debt burden positively impacts borrowing costs. The most important factors are the country’s credit rating and the assessment of investors regarding the issuer’s ability to service debt continuously and correctly,” Gujaničić said.
Regarding the possibility of further interest rate increases, Gujaničić stated that domestic rates will largely depend on the global interest rate environment, which is significantly influenced by inflationary pressures. “Therefore, a continued decrease in ECB rates would positively impact Serbia’s future borrowing costs. On the other hand, elevated inflationary pressures in our country, political instability, and the unsustainable domestic economic model—based on excessive state investments and foreign investments—remain negative factors,” he noted.
What the data shows
In addition to showing that Serbia pays high borrowing rates compared to the EU, AMECO data also indicates that Serbia has a moderate public debt in relation to its GDP.
As of the end of 2024, Serbia’s public debt stood at 47.5% of GDP, well below the EU average of 82.4%, and significantly lower than the Eurozone’s 89.1%.
The least indebted European countries are Estonia (23.2%), Bulgaria (24.5%), Luxembourg (27.5%), Denmark (31%) and Sweden (32.8%).
The most indebted European country remains Greece, with a public debt of 153.1% of GDP, followed by Italy at 136.6%, France at 112.7%, Belgium at 103.4%, and Spain at 102.3%.
Despite their high debts, these countries all pay lower interest rates than Serbia, as markets have more trust in their economies.
For example, Germany has a public debt of 63% of GDP—higher than Serbia’s—but pays an interest rate of only 1.7%. France, with over 110% public debt, faces an interest rate of just 2%.
When it comes to Central and Eastern European countries, often compared with Serbia, their average interest rate in 2024 was 3.3%, still lower than Serbia’s, but reflecting the region’s higher risk compared to Western Europe.
