Serbian Economy at the Beginning of 2022

Economic Growth

- Serbia’s GDP growth rate has been on the level of 1.9% in 2017, 4.5% in 2018, 4.3% in 2019 and -0.9% in 2020. According to the latest estimates of the Statistical Office of Serbia, GDP growth in 2021 reached the level of 7.5% and it was mainly driven by private consumption and investment. Serbian GDP growth in 2022 is expected to be on the level of 4.5% (pre-Covid-19 crisis rate of growth) and simillar level in 2023. It is also obvious that if Serbia wants to have high, constant and sustainable GDP growth in the long run, it will have to introduce significant structural reforms. In 2019, the World Bank in Serbia published the document “Serbia’s New Growth Agenda”, where it showed potential for Serbia to grow by 7% a year and to double its income in 10 years.


- According to the latest estimates of the Statistical Office of Serbia, the annual inflation rate in Serbia equals 7.8%, which is the highest inflation rate since 2013. Even though it is very difficult to predict inflation under current circumstances, Serbian economists predict that it will be on the level of 5-6% by the end of the year. It is obvious that high inflation will be felt in 2022, since there will be expected rise in gas prices and electricity price for businesses, which will have spillover effect to basic consumer goods. Serbian economists claim that inflation in Serbia is mainly imported (and related to energy crisis), but at the same time it is partly a consequence of extremely expansionary fiscal and monetary policies over the past two years, mainly aimed to reduce negative consequences to production and to stimulate economic growth (as a response to Covid-19 crisis). Serbian economists claim that trying to keep inflation under control will be the most important task in 2022.


- According to the Serbian Statistical Office, the growth of gross salaries in Serbia by the end of November 2021 amounted to 9.1% nominally and 5.2% in real terms, compared to 2020. Average gross salary amounted to RSD 95,312 (around EUR 811) and net salary RSD 69,136 (around EUR 588). Minimal salary increased by 9.4% in 2022 and it amounts to RSD 35,012 (close to EUR 300). In 2021 minimal salary covered 81% of the minimum consumer basket and promise of the Ministry of Finance is that it will match the costs of the minimum consumer basket in 2023 or 2024. According to the 2022 budget, public sector salaries will increase by 7-8% (depending on category/profession) and pensions by 5.5%. However, with given inflation rate, it is obvious that real wages of public sector employees will be on the same level or in the best-case scenario they will grow around 1-2%. At the same time, pensioners will most likely experience the drop of real income. Announced RSD 20,000 (around EUR 170) that are distributed to pensioners as one-off aid at the beginning of February 2022 will in a way mitigate this situation. Even though authorities stated that they are committed to implement the public wage system reform, it has been postponed for number of times already, starting from 2018 (and initially announced even in 2015). The latest announced date for implementation of public wage system reform is 2025.


- In period 2015-2018, investments were below 20% of GDP. In 2019 they reached the level of 22.5%, in 2020 they were on the level of 21.4% and they are estimated to be 23.8% of GDP at the end of 2021. The National Bank of Serbia (NBS) estimates that investments will reach 25% of GDP in 2022. In 2021, public investments are estimated to be on the level of 7.8% of GDP, which is actually very good level for Serbia. As in 2021, the Government announced that it will focus on public investments also in 2022 and it allocated approximately EUR 4.1 billion or around 7.3% of GDP for that purpose in 2022 budget. This is very good signal, since the World Bank estimated that if Serbia would like to have long-term sustainable GDP growth of around 7%, this requires investments of at least 25-26% of GDP every year, including at least 5%- 5.5% share of public investments in the medium term. More public investments primarily into road, railway, energy and environment infrastructure, as well as education and healthcare are needed in Serbia. The Government announced investments of EUR 14 billion by 2025, including EUR 9 billion in transport infrastructure, EUR 1 billion for water and sewage infrastructure, EUR 1 billion for energy infrastructure, EUR 600 million for healthcare and EUR 500 million for education and digitalization, among other investments. However, better management of public investments and more transparency is needed, as well as reforms to increase project implementation capacity of the public sector, as it is very common that large public projects are lagging with implementation.

- National Bank of Serbia preliminary announced that Foreign Direct Investments (FDI) in 2021 have been on the level of EUR 3.9 billion, which is even more than in 2019 (as the record year so far with EUR 3.815 billion). Continuous attraction of FDI stays one of the priorities in the following period. However, there is a need to gradually reduce the level of subsidies and to focus on technologically advanced, high value-added investments that will have a larger impact on the economy.

Public Debt

- As a consequence of a good fiscal results in previous years, Serbia experienced decrease in its public debt, which reached the level of 52.1% of GDP at the end of 2019. However, the Covid-19 epidemic made slowdown of the economy and increased public spending, which resulted in a significant increase in the budget deficit and a sharp increase in public debt. The value of economic measures to fight negative consequences of Covid-19 in 2020 has been on the level of EUR 5.8 billion, or 12.9% of GDP and in 2021 on the level of EUR 2.2 billion, or 4.2% of GDP. Therefore, Serbia ended 2020 with the debt of EUR 26.67 billion, or 57% of GDP. The Ministry of Finance announced that Serbia’s public debt at the end of 2021 was EUR 30.13 billion, or 56.9% of GDP.

- According to the budget for 2022, the Government plans deficit of around EUR 1.7 billion, or 3% of GDP. In 2020 budget deficit has been on the level of EUR 3.8 billion and in 2021 on the level of EUR 2.43 billion, or 4.6% of GDP. This indicates that there is a plan to have gradual fiscal deficit decrease, from year to year. However, deficit of 3% of GDP is still high and unsustainable in the long term.


- According to the Labor Force Survey, unemployment in Serbia in Q3 2021 has been at the level of 10.5%, while the rate of employment equaled 50% (2.6% increase compared to 2020). In last couple of years, there has been trend of decreasing unemployment rate in Serbia (12.7% in 2018, 10.4% in 2019, 9% in 2020), with the exception of 2021, where consequences of Covid-19 crisis were clearly reflected. However, general trend of reduction of unemployment is not only because more people get employed, but also because more and more people migrate abroad. Some analysis show that nowadays around 4,000 people leave Serbia every month, or approximately 51,000 people leave Serbia every year. At the moment, shortages in labor are mostly felt in IT industry, as well as shortages of salesmen, drivers, storage experts, machinery operators, construction workers and farmers. In order to motivate people to stay in the country, improvements in living and working conditions are needed, followed by reduction of costs (in form of labor taxes) and better training system. There have been some improvements in tax policies lately.


- Remittances received from the Serbian citizens living abroad make a big impact on the Serbian economy every year. More than 835,000 people in Serbia receive remittances from their relatives abroad each year. Remittances amounted to EUR 2.95 billion in 2017, EUR 3.53 billion in 2018, EUR 3.51 billion in 2019 and EUR 3.1 billion in 2020. Amount of remittances significantly reduced in 2020 because of Covid-19 crisis. In first nine months of 2022 remittances were on the level of EUR 2.584 billion or 17.2% higher than in the same period in 2020, which means that in 2021 they will most likely return to pre-crisis level.

Industrial Production and Foreign Trade

- Serbian Statistical Office announced that industrial production increased by 6.3% in 2021, compared to 2020. The mining sector production grew by 40.6% year on year, supplies of electricity, gas and steam and air conditioning increased by 7.5% and the manufacturing industry increased by 2.3%. On the other hand, the retail trade experienced growth of 15.9% in the in 2021, compared to 2020. According to the Statistical Office, exports of goods from Serbia in 2021 amounted to EUR 21.6 billion, which is an increase of 26.8% compared to the same period in 2020. At the same time, imports amounted EUR 28.61 billion, which is an increase of 24.6%. The total foreign trade in 2021 amounted to EUR 50.22 billion, which is an increase of 25.5% compared to 2020. The coverage of imports by exports was 75.6%, and was higher than the coverage in the same period in 2020, when it amounted to 74.3%.

Structural Reforms

- In order to have a higher and sustainable economic growth in the future, Serbia will have to work further on its structural reforms. Building better and stronger institutions is precondition for a long-term economic growth. Looking at Fiscal Council’s recommendations on the fiscal strategy in the following period, the focus should be on salary system reform, clear definition of the public investment priorities, better monitoring of fiscal risks (including fines and penalties) and structural improvement in expenditures on subsidies.

General Overview and Outlook

- World Bank estimates that over the medium term, the Serbian economy is expected to grow steadily at around 4% annually. Challenges in the long-run include an aging population and climate change. Labor shortages, combined with skills mismatches, could negatively affect the competitiveness of the Serbian economy.

- In June 2021, Serbia signed advisory arrangement with the International Monetary Fund (the Policy Coordination Instrument) that will last for 30 months. The main goal of this arrangement is further reform of public companies, reform of Serbian Tax Administration and the green agenda.

- European Commission growth outlook implies that a stronger or more durable hike of inflation, particularly due to continued pressure from unprocessed food and energy prices, could weaken purchasing power and become a problem for the real growth. On the other hand, increased nearshoring of production could have beneficial effects on FDI and exports. Potential lies in faster implementation of public infrastructure projects and of reforms of state-owned enterprises.

- The Fiscal Council emphasizes wider and more complex social challenges, which could be resolved only by carefully planned and strategic policies and not by making ad-hoc measures. These policies include population politics, aging, migration of qualified labor force, inequalities and socially vulnerable population, climate change, pollution and environmental problems, education system and public health. Special emphasis should be made in these fields, especially because indicators that describe them are devastating. 


Main Sources:

- European Commission, European Economic Forecast, Autumn 2021;

- International Monetary Fund, Republic of Serbia: First Review under the Policy Coordination Instrument, December 2021;

- National Bank of Serbia, Macroeconomic Developments in Serbia, January 2022;

- Serbian Fiscal Council, Assessment of the proposed Budget Law of the Republic of Serbia for 2022, November 2021;

- Statistical Office of the Republic of Serbia, Economic trends in the republic of Serbia in 2021, December 2022;

- Serbian Fiscal Council, Opinion on the Revised Fiscal Strategy for 2022, with Forecasts for 2023 and 2024, November 2021;

- World Bank, Western Balkans Regular Economic Report, Fall 2021;

- World Bank, Serbia’s New Growth Agenda, December 2019.