Serbia's economic growth in 2022 was almost half as slow (2.3%) compared to Western Balkan countries (4.1%), significantly slower than the Visegrad Group (3.6%), as well as the average of Bulgaria and Romania (4.2%). However, it should be noted that the relatively slower economic growth of Serbia compared to its competitors must be viewed in light of its faster recovery from the COVID crisis, the significant share of agribusiness which suffered severe external shocks during the observed period, as well as poor management of the energy sector. On the other hand, GDP growth was driven by accelerated growth of the „naturally competitive“ part of Serbian exports (medium-tech manufacturing), and FDI inflows. Serbia recorded positive labor market trends, with rising employment and falling unemployment, and wages growing faster than inflation.
From the perspective of economic growth and development, the multi-year remark by the RG on the detrimental effects of a development policy that focuses exclusively on FDI (which is already very high and continues to grow) while neglecting the SME sector in terms of both the legislative and strategic framework and in practice (which has begun to threaten the disinflation policy) remains valid. Fiscal policy, primarily the real reduction of state spending, had a mildly contractionary effect on economic growth, and the budget rebalance projected a lower deficit compared to the previous year but with unjustified extraordinary expenditures that will further stimulate demand and slow down inflation. Lack of transparency and planning continues to apply to public investments and subsidies, especially new ones directed towards agriculture. Inflation is still high (11.5% in August) and represents the biggest macroeconomic challenge at the moment, raising questions about the success of the disinflation policy, which is paired with fiscal measures that stimulate demand. We emphasize that restrictive monetary policy aimed at curbing inflation, in addition to the population, affects domestic companies the most, primarily the SME sector, which represents one of the unintended negative effects of this policy.
Considering economic trends, economic growth in Serbia in 2023 will not be high. The slowdown in economic growth in the last quarter of 2022 and the first quarter of 2023 in Serbia (0.7%) and comparable countries (2.4% in WB, -0.1% in Visegrad Group countries, 2.3% in BG/RO) is significantly contributed to by – the slowed growth / approach to recession in the EU (Serbia's exports were not affected during 2022, however, since April 2023, their growth has slowed to below 10% nominally year-on-year), another bad agricultural season (due to adverse weather conditions during the summer and phytosanitary challenges in grain exports during the winter), a decline in credit activity due to restrictive monetary policy in both the EU and Serbia, as well as the further deepening of the global banking sector crisis. Considering the above, as well as the flash estimate of growth rates in the first half of the year, we believe that the expected growth rate for 2023 could be around 2%.
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CEVES has been the coordinator of the working group for the chapter on Economic Policies since December 2020. Members of the working group also include Dr. Milojko Arsić, professor at the Faculty of Economics in Belgrade, Dr. Petar Veselinović, dean at the Faculty of Economics in Kragujevac, Dr. Milan Nedeljković, dean at FEFA, Belgrade, Ana Milinković, representative of CEP, Branko Drčelić, representative of NALED, Marko Malović, dean at EDUCONS University, Nenad Jevtović, director of the Institute for Development and Innovation, Mihajlo Gajić, president of LIBEK, Miloš Obradović, journalist at Danas, Velibor Tatić, independent consultant, Branimir Jovanović, economist at WiiW, Goran Radosavljević, professor at FEFA, Jasna Dimitrijević Atanasijević, professor at the Faculty of Science of the University of Novi Sad, Lazar Ivanović, economist at CEVES. The RG coordinator is Kori Udovički, CEVES.
We thank the working group members for their expert contribution, the National Convention on the European Union and the European Commission for the opportunity to present our views, and we look forward to future cooperation.
