Serbia is in a surprisingly positive economic position despite extremely difficult conditions globally. This is the result of both political and economic choices
According to the latest forecasts of economic trends in 2024, the expected end of the recession will not be forthcoming. On the contrary, reduced growth is being announced at both the European and global levels.
We are leaving behind the economically difcult year of 2023 only to enter an even more difcult year. Economic pessimism, and in many cases also frustration over the exhausting of the arsenal of activities and incentive measures, represent the prevailing current sentiment. The European business cycle is being led by deindustrialisation, which to a lesser extent stems from declining demand globally. The advantages of productivity and efficiency from closer international cooperation are no longer possible as a result of geopolitical tension. The war in Ukraine has worsened previously observed production problems by raising energy costs, while the radicalisation of the conflict in the Middle East brings even greater negative potential. Fiscal policies are coming under increasing pressure. The available resources required to refinance the debts of future generations are decreasing rapidly, while spending has increased as a result of investments in the defence sector. Embedded high inflation is distortionary, while its prolonged impact implies high real interest rates, which would harm both private and public investments, and consequently also future growth.
The result of the preserving of economic stability and positive medium-term prospects is interest in continuing to invest in Serbia among foreign investors
Also becoming more pronounced are demographic problems, the aging population and the shortage of qualified labour in many sectors. Technological progress and various dimensions of digitalisation are exerting considerable pressure on business models in all sectors to modernise and adapt quickly, with a strong imperative to accelerate decarbonisation. The situation is slightly more stable across the ocean, as a result of the overcoming of tension over late September’s approval of the interim budget for the U.S. government. But that doesn’t reduce the fact that agency Fitch recently stripped the U.S. of its highest credit rating due specifically to the worsening medium- term fiscal outlook, excessive public debt, political instability and weak economic activity.
Serbia is in a surprisingly positive economic position under these circumstances. It is persisting in its insistence on neutrality. Such a stance is highly risky, but at this moment high risk is closely associated with higher gains. Excellent economic cooperation, primarily with China, is yielding positive effects in numerous fields. Expectations are even greater when it comes to the signing of the Free Trade Agreement. It sounds unbelievable that industrial production in Serbia was 5.7% higher this August than it was in the same month of last year. Almost a third of the increase in production comes from the processing sector. This is the best result in Europe (for example, production in the Eurozone fell by an average of 5% during this period). Serbia’s total economic growth this year will stand at around 2.5% and will be driven by net exports and fixed investments. Interest among foreign investors also isn’t waning, thanks to the preserving of economic stability and positive medium-term prospects. Viewed globally, inflation is slowing down this year. However, the struggle against inflation is continuing, despite some of its causes now being under control – supply chains have recovered, while shipping and transportation costs have reduced.