The impact on Serbia’s economy caused by the war in Ukraine is likely to remain moderate. However, the war will adversely affect all macroeconomic indicators. Growth forecasts have been downgraded because of sharply higher inflation, trade exposure to Russia and a weaker European economy. Serbia’s central bank has carried out only moderate monetary tightening so far, expecting that the jump in inflation will be short-lived [...]
The Serbian economy was only moderately affected by the consequences of the Covid-19 pandemic in 2020. Activity barely contracted, whilst the central bank maintained an adequate level of foreign-currency liquidity against a background of significant euroisation of the economy [...]
Economic growth in Serbia has accelerated since 2017, fuelled by consumption and investment. Inflation is still mild thanks to the appreciation of the dinar. This favourable environment has produced a fiscal surplus that gives the government some flexibility. The public debt is narrowing, even though it is still relatively high and vulnerable to exchange rate fluctuations and the appetite of international investors [...]
Serbia is a market economy but the public sector remains significant in certain areas and a number of institutional reforms are required. The economy relies on manufacturing and exports, driven largely by foreign investment. Despite some progress towards EU membership, it remains a distant objective. Public debt remains at a fairly high level. A large part of the economy is euro-based (67% of total loans). The SRD is likely to remain broadly stable in the short term given central bank interventions to prevent harmful depreciation.
In the medium term, socio-political constraints will continue to put a limit on the pace of reform. Unfavourable demographic trends (as in the other Western Balkan countries) is a constraint on potential growth. The country entered the pandemic in a relatively favourable economic situation. Economic activity was resilient to the consequences of the pandemic (-0.9% in 2020), but the fiscal deficit rose to a high level.