The largest European economy ended 2023 in recession, i.e. with an economic decline of 0.3 percent. Problems in supply chains, persistent inflationary pressures (primarily expensive energy), weaker demand for products and high interest rates have taken their toll.
According to preliminary data, the contraction of the German economy continued in January and the estimates suggest that the trend will continue throughout 2024. Since Germany has been Serbia’s largest external trade partner for many years, the impact of its recession on the Serbian economy is inevitable.
Veljko M. Mijušković, PhD, economist and assistant professor at the Faculty of Economics in Belgrade, says that the impact of the German recession on Serbia can be significant considering various aspects of the economic links between our two countries.
“Germany is one of Serbia’s biggest trade partners. If their economy experiences a recession or decline, this may reduce the demand for Serbian export products, resulting in a negative impact on Serbian exports and economic growth”, says Dr Mijušković.
Furthermore, given that German companies often invest in Serbia, create new jobs and contribute to the country’s economic development, if the situation were to change for the worse in the German economy, there is a danger that it would affect investment decisions, i.e. the influx of the German foreign direct investments into Serbia would potentially be reduced.
Dr Mijušković points out that if there is a further deterioration of the German economy, this will have negative consequences for the export-oriented economy of Serbia, as well as for the service sector. Specifically, the following economic branches would suffer – the automotive industry, metallurgy, the agricultural and food industry, the construction sector and tourism.
“Serbia has a significant automotive sector. If there is a decrease in demand for vehicles or auto components in Germany, it will have a negative impact on domestic exporters from this industry”, says Dr Mijušković.
(Biznis i Finansije, 30.01.2024)
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