Serbia has been developing dynamically since the beginning of the XXI century. Despite the disruption of logistics chains, as well as the consequences of international economic sanctions, trade liberalization, restructuring and privatization of some enterprises, as well as increasing exports and the country's desire for integration with the EU ensured an annual increase in the country's real GDP by an average of 6.2% annually until the global crisis of 2008.
The consequences of the crisis were overcome in the second half of the 2010s thanks to significant investments in infrastructure development, improvement of the investment climate, concluded free trade agreements with the EU, Russia and Turkey, as well as the overall recovery of the Eurozone economy. As a result, the average annual growth rate of the country's GDP for 2015-2019 amounted to 3.2%, the average inflation rate decreased to 1.9%, and the standard of living significantly increased and the inflow of foreign direct investment increased.
In 2020, due to the introduction of quarantine restrictions and the slowdown in the global economy due to the COVID-19 pandemic, Serbia's GDP decreased by 0.9%, but thanks to timely measures to support the population, including lump-sum payments to citizens, and targeted support to the most affected sectors of the economy, the government managed to avoid a more serious recession. Due to the effect of deferred demand and a sharp increase in exports (by 31.9% in value terms) in 2021, the Serbian economy grew by a record 7.5% in 17 years.
In 2022, GDP growth slowed to 2.3% due to global political instability, structural problems in Serbia's energy sector and increased inflation. According to the forecasts of the IMF and the World Bank, Serbia's economy will grow by 2.0% in 2023, while Oxford Economics experts expect higher growth of 2.6%.
The further development of the country's economy depends on the speed and effectiveness of the implementation of the transformation program in the country, as well as on the economic indicators of Serbia's main trading partners. It is expected that structural reforms in education and the energy sector, with further improvement in the quality of governance, will strengthen the positive effects of economic growth and increase the attractiveness of Serbia for foreign investment. In this regard, a gradual acceleration of the country's economic growth is expected in the medium term. In particular, the IMF forecasts an increase in Serbia's GDP by 3.0% in 2024. and by 4.5% in 2025, and Oxford Economics — by 2.8% and 5.0%, respectively.
Serbia's GDP by PPP per capita in 2022 amounted to 24.6 thousand US dollars, and by 2028, according to IMF forecasts, it will reach 35.5 thousand US dollars, demonstrating an average annual growth rate of 6.4% in 2023-2028.
Against the background of the COVID-19 pandemic crisis in 2020, the Central Bank of Serbia decided to gradually reduce the interest rate in order to maintain economic activity. As a result, the rate remained at the level of 1% from the end of 2020 to the beginning of 2022, further stimulating the recovery of the country's economy after the end of the acute phase of the pandemic.
However, in the spring of 2022, against the background of a sharp increase in world prices and the subsequent increase in inflationary pressure, the government and the Central Bank decided to tighten monetary policy in order to stabilize prices and reduce public debt. The interest rate gradually increased and reached 5% by the end of 2022. Despite this, according to the IMF, inflation at the end of the year was 12.0%, which is the highest rate in the country since 2008.
In 2023, there was no slowdown in price growth, in March 2023, inflation reached a record 16.2%, which is the highest indicator since the beginning of measuring the consumer price index in 2007. In this regard, the Central Bank of Serbia continued to increase the interest rate, set at 6% in April, and at 6.5% in July.
The IMF predicts that inflation will peak at 12.4% in 2023, while Oxford Economics expects it to decrease by the end of the year to 11.8%. In the medium term, international experts expect a gradual stabilization of price growth to 3.0% per year, which will allow the government to accelerate the implementation of structural reforms aimed at improving the business climate.
