Serbia recorded the highest gross domestic product (GDP) growth rate in Europe in the first quarter of this year, with the economy growing by 3.2 per cent during that period. However, as Professor Milojko Arsić of the Faculty of Economics told N1, “we are not the best in Europe; three countries have a higher growth rate.”
“Those are Denmark, Poland and Malta, and it is possible that when data for all countries are published, one or two more countries will have higher growth. Regardless of that, it is a good result for a single quarter. But a country’s economic performance cannot be measured by the result of one quarter alone; assessing economic success requires looking at a longer period – five or ten years,” Arsić explained.
Asked whether he had expected such a result, namely this growth rate, Arsić said it was “somewhat higher than expected”. “If we look at the drivers, they are primarily domestic current consumption, meaning spending by households and the state. If we look at investments, their growth was very modest. On the other hand, exports recorded relatively good growth. Also, when growth is analysed by sector, the main drivers are agriculture and various services, such as trade, transport, IT services and financial services,” Arsić said.
He added that industrial production is stagnating, while manufacturing activities have delivered weak results. “This figure includes relatively strong growth in agriculture, but it is not certain that this will be achieved throughout the entire year. If drought occurs in July and August, it could negatively affect yields of autumn crops, which are important for Serbia,” Arsić believes.
Asked about Serbia’s economic performance over the previous period, Arsić said that, looking at the last ten years, Serbia had achieved “above-average results compared with the rest of Europe”.
“However, if we look over a longer period, for example, since 2012, when there was a change of government, we are at the European average. During the first five years of the current administration, Serbia recorded the weakest results among the 16 countries of Central and Eastern Europe,” Arsić said.
Still, he added, none of this is spectacular. “For example, over the past four years, neighbouring countries such as Montenegro, Albania and Croatia have grown faster than Serbia. It is natural for less developed countries to grow more quickly and catch up with developed economies. Serbia should be doing the same, but at a faster pace than it has over the last 25 years,” Arsić assessed.
Asked whether this means Serbia is trapped in medium growth rates, Arsić referred to a well-known economic theory: “Countries that fail to adopt advanced technologies, and to some extent develop them themselves, cannot reach a high level of development.”
Chinese investments as a lifeline?
Asked whether recently announced Chinese investments, as well as existing ones, would lead to stronger growth, Arsić said they would “have a positive short-term impact on economic growth”.
“But when it comes to new technologies, they will be significant for Serbia only if Serbia participates more substantially in the production process. In other words, if it is merely a matter of assembling robots, that will not be of great benefit. If Serbian engineers are involved, then it will be beneficial,” Arsić said.
Asked whether Chinese investments have compensated for the decline in investments from other sources, Arsić answered categorically: no. “If we look at total investment last year and in the first half of this year, it is significantly lower than it used to be. This can also be expected in the future because Serbia is no longer as inexpensive for certain industries, such as textiles and automotive wiring production. Investors in those sectors are no longer investing in Serbia, and some are even withdrawing,” Arsić said.
According to him, Serbia will not be able to rely on high levels of foreign investment in the future. “Serbia can compensate for the decline in foreign investment through domestic investment, particularly private domestic investment, which remains very low. There are no signs that the situation is improving,” the N1 interviewee believes.
Asked about inflation and rising prices, as well as the National Bank of Serbia’s forecast that inflation could reach 6 per cent by the end of the year, Arsić said all such projections are conditional. “They are based on the assumption that there will be no further increase in oil prices, and there are expectations that oil prices will start falling from the middle of the year. Everything depends on how the conflict in the Middle East develops. Simply put, the impact of oil prices on inflation depends on how long they remain at a high level. If prices stay around their current level, then the National Bank’s projection is quite reasonable. Personally, I might add another percentage point,” Arsić said.
(N1, 05.06.2026)