Economy of Serbia
The economy of Serbia is a service-based upper middle income economy with the tertiary sector accounting for two-thirds of total gross domestic product and functions on the principles of the free market. Nominal GDP in 2019 is projected to reach $51.523 billion, which is $7,398 per capita, while GDP based on purchasing power parity stood at $129.298 billion, which is $18,564 per capita.
The strongest sectors of Serbia's economy are energy, automotive industry, machinery, mining, and agriculture. Primary industrial exports are automobiles, base metals, furniture, food processing, machinery, chemicals, sugar, tires, clothes, pharmaceuticals. Trade plays a major role in Serbian economic output. The main trading partners are Germany, Italy, Russia, China, and neighboring Balkan countries.
Belgrade is the capital and economic heart of Serbia and home to most major Serbian and international companies operating in the country, as well as the National Bank of Serbia and the Belgrade Stock Exchange. Novi Sad is the second largest city and the most important economic hub after Belgrade.
Historical preview
In the late 1980s, at the beginning of the process of economic transition from a planned economy to a market economy, Serbia's economy had a favorable position in comparison to most of the Eastern Bloc countries, but it was gravely impacted by the Yugoslav Wars and UN sanctions and trade embargo during the 1990s. At the same time, the country experienced a serious "brain drain". After the overthrow of Slobodan Milošević in 2000, Serbia went through a process of transition to a market-based economy and experienced fast economic growth. During that period, the Serbian economy grew 4-5% annually, average wages quadrupled, and economic and social opportunities dramatically improved. During the Great Recession, Serbia marked a decline in its economy of 3.1% in 2009, and following years of economic stagnation pre-crisis level of GDP was reached only in 2016.Since 2014, the country has been in the process of accession negotiations to join the European Union.
Macroeconomic trends
Economic growth
The average growth of Serbia's GDP in the last five years was 4% per year. GDP structure by sector is: services 67.9%, industry 26.1%, agriculture 6.0%.Public finances
Serbia's public debt relative to GDP from 2000 to 2008 decreased by 140.1 percentage points, and then started increasing again as the government was fighting effects of worldwide 2008 financial crisis. In 2018, the public debt stood at 53.8% of GDP.Serbian foreign exchange reserves were highly augmented from 2000 to 2009, when they amounted 10.6 billion euros and have stayed at that level ever since.
Currency and inflation
The official currency in Serbia is the Serbian dinar and its earliest use dates back to 1214.Serbia historically has battled high inflation, especially during the 1980s and 1990s. In 1992 and 1993, it experienced a period of hyperinflation which lasted for a total of 25 months. In 1993, the monthly inflation rate stood at a staggering 313 million percent. Since the early 2000s, inflation rate has stabilized and in the last couple of years a relatively low level of inflation was recorded.
External trade
Serbia has a wide-range of free trade agreements with foreign countries and trading blocs.Serbia signed a free trade agreement with the European Union in 2008 enabling exports of all products originating from Serbia without customs and other fees. For a limited number of products, annual import quotas remain in effect. As of 2016, the EU countries were the largest trading partners of Serbia with 64.4% of country's total foreign trade.
Serbia signed the CEFTA enabling exports of all products originating from Serbia without customs and other fees to the neighbouring countries: Albania, Bosnia and Herzegovina, North Macedonia, Moldova, Montenegro and Kosovo. In 2016, the CEFTA countries were the second largest trading partners of Serbia.
Serbia signed a free-trade agreement with EFTA members in 2009.
The Serbian free-trade agreement with Russia was implemented since 2000; for a limited number of products, annual import quotas remain in effect. Free-trade agreement with Turkey has been implemented since 2010. Trade with the United States is pursued under the Generalized System of Preferences with a preferential duty-free entry for approximately 4,650 products.
Foreign direct investments
Attracting foreign direct investments is set as a priority for the government of Serbia, which provides both financial and tax incentives to companies willing to invest.Leading investor nations in Serbia include: Germany, Italy, United States, China, Austria, Norway, and Greece. Majority of FDI went into automotive industry, food and beverage industry, machinery, textile and clothing.
Blue-chip corporations making investments in manufacturing sector include: Fiat Chrysler Automobiles, Bosch, Michelin, Siemens, Panasonic, Continental, Schneider Electric, Philip Morris, LafargeHolcim, PepsiCo, Coca-Cola, Carlsberg and others. In the energy sector, Russian energy giants, Lukoil and Gazprom have made large investments. In metallurgy sector, Chinese steel and copper giants, Hesteel and Zijin Mining have acquired steel mill in Smederevo andcopper mining complex in Bor, respectively. The financial sector has attracted investments from Italian banks such as Intesa Sanpaolo and UniCredit, Crédit Agricole and Société Générale from France, Erste Bank and Raiffeisen from Austria, among others. ICT and telecommunications saw investments from likes such as Microsoft, Telenor, Telekom Austria, and NCR. In retail sector, biggest foreign investors are Dutch Ahold Delhaize, German Metro AG and Schwarz Gruppe, Greek Veropoulos, and Croatian Fortenova.
Economic sectors
Agriculture
Serbia has very favourable natural conditions for varied agricultural production. It has 5,056,000 ha of agricultural land, out of which 3,294,000 ha is arable land. In 2016, Serbia exported agricultural and food products worth $3.2 billion, and the export-import ratio was 178%. Agricultural exports constitute more than one-fifth of all Serbia's sales on the world market. Serbia is one of the largest provider of frozen fruit to the EU. Agricultural production is most prominent in Vojvodina on the fertile Pannonian Plain. Other agricultural regions include Mačva, Pomoravlje, Tamnava, Rasina, and Jablanica.In the structure of the agricultural production 70% is from the crop field production, and 30% is from the livestock production. Serbia is world's second largest producer of plums, second largest of raspberries, it is also significant producer of maize and wheat. Other important agricultural products are: sunflower, sugar beet, soybean, potato, apple, pork meat, beef, poultry and dairy.
There are 56,000 ha of vineyards in Serbia, producing about 230 million litres of wine annually. Most famous viticulture regions are located in Vojvodina and Šumadija.
Energy
The energy sector is one of the largest and most important sectors to the country's economy. Serbia is a net exporter of electricity and importer of key fuels.Serbia has an abundance of coal, and significant reserves of oil and gas. Serbia's proven reserves of 5.5 billion tons of coal lignite are the 5th largest in the world. Coal is found in two large deposits: Kolubara and Kostolac. Despite being small on a world scale, Serbia's oil and gas resources have a certain regional importance since they are largest in the region of former Yugoslavia as well as the Balkans. Almost 90% of the discovered oil and gas are to be found in Banat and those oil and gas fields are by size among the largest in the Pannonian basin but are average on a European scale.
The production of electricity in 2018 in Serbia was 38.3 billion kilowatt-hours, while the final electricity consumption amounted to 28.1 billion kilowatt-hours. Most of the electricity produced comes from thermal-power plants and to a lesser degree from hydroelectric-power plants and wind energy. There are 6 lignite-operated thermal-power plants with an installed power of 3,936 MW; largest of which are 1,502 MW-Nikola Tesla 1 and 1,160 MW-Nikola Tesla 2, both in Obrenovac. Total installed power of 9 hydroelectric-power plants is 2,831 MW, largest of which is Đerdap 1 with capacity of 1,026 MW. In addition to this, there are mazute and gas-operated thermal-power plants with an installed power of 353 MW. The entire production of electricity is concentrated in Elektroprivreda Srbije, public electric-utility power company.
The current oil production in Serbia amounts to over 1.1 million tons of oil equivalent and satisfies some 43% of country's needs while the rest is imported. National petrol company, Naftna Industrija Srbije, was acquired in 2008 by Gazprom Neft. The company's refinery in Pančevo is one of the most modern oil-refineries in Europe; it also operates network of 334 filling stations in Serbia and additional 36 stations in Bosnia and Herzegovina, 31 in Bulgaria, and 28 in Romania. There are 155 kilometers of crude oil pipelines connecting Pančevo and Novi Sad refineries as a part of trans-national Adria oil pipeline.
Serbia is heavily dependent on foreign sources of natural gas, with only 17% coming from domestic production and the rest is imported, mainly from Russia. Srbijagas, public company, operates the natural gas transportation system which comprise 3,177 kilometers of trunk and regional natural gas pipelines and a 450 million cubic meter underground gas storage facility at Banatski Dvor.
Industry
The industry is the economy sector which was hardest hit by the UN sanctions and trade embargo and NATO bombing during the 1990s and transition to market economy during the 2000s. The industrial output saw dramatic downsizing: in 2013 it was expected to be only a half of that of 1989. Main industrial sectors include: automotive, mining, non-ferrous metals, food-processing, electronics, pharmaceuticals, clothes. Serbia has 14 free economic zones as of September 2017, in which many foreign direct investments are realized.Automotive industry is dominated by cluster located in Kragujevac and its vicinity, and contributes to export with about $2 billion. Country is a leading steel producer in the wider region of Southeast Europe and had production of nearly 2 million tons of raw steel in 2018, coming entirely from Smederevo steel mill, owned by the Chinese Hesteel. Serbia's mining industry is comparatively strong: Serbia is the 18th largest producer of coal extracted from large deposits in Kolubara and Kostolac basins; it is also world's 23rd largest producer of copper which is extracted by Zijin Bor Copper, a large copper mining company, acquired by Chinese Zijin Mining in 2018; significant gold extraction is developed around Majdanpek. Serbia notably manufactures intel smartphones named Tesla smartphones.
Food industry is well known both regionally and internationally and is one of the strong points of the economy. Some of the international brand-names established production in Serbia: PepsiCo and Nestlé in food-processing sector; Coca-Cola, Heineken and Carlsberg in beverage industry; Nordzucker in sugar industry. Serbia's electronics industry had its peak in the 1980s and the industry today is only a third of what it was back then, but has witnessed a something of revival in last decade with investments of companies such as Siemens in Subotica, Panasonic in Svilajnac, and Gorenje in Valjevo. The pharmaceutical industry in Serbia comprises a dozen manufacturers of generic drugs, of which Hemofarm in Vršac and Galenika in Belgrade, account for 80% of production volume. Domestic production meets over 60% of the local demand.
Telecommunications and IT industry
Fixed telephone lines connect 89% of households in Serbia, and with about 8.82 million users the number of cellphones surpasses the total population of Serbia by 25%. The largest mobile operator is Telekom Srbija with 4.06 million subscribers, followed by Telenor with 2.73 million users and Vip mobile with about 2.03 million. Some 58% of households have fixed-line broadband Internet connection while 67% are provided with pay television services. Digital television transition has been completed in 2015 with DVB-T2 standard for signal transmission.The Serbian IT industry is rapidly growing and changing pace. In 2018, IT services exports reached $1.3 billion. With 6,924 companies in the IT sector, Belgrade is one of the information technology centers in this part of Europe, with strong growth. Microsoft Development Center located in Belgrade was at the time of its establishment fifth such center in the world. Many world IT companies choose Belgrade as regional or European center such as Asus, Intel, Dell, Huawei, NCR, Ubisoft etc. These companies have taken advantage of Serbia's large pool of engineers and relatively low wages.
Large investments by global tech companies like Microsoft, typical of the 2000s, are being eclipsed by a growing number of domestic startups which obtain funding from domestic and international investors. What brought companies like Microsoft in the first place was a large pool of talented engineers and mathematicians. In just the first quarter of 2016, more than US$65 million has been raised by Serbian startups including $45 million for Seven Bridges and $14 million for Vast. One of the most successful startups have been Nordeus which was founded in Belgrade in 2010 and is one of Europe's fastest-growing companies in the field of computer games.
Tourism
The touristic sector accounted for 1.4% of GDP in 2017 and employs some 75,000 people, about 3% of the country's workforce. Foreign exchange earnings from tourism in 2018 were estimated at $1.5 billion.Serbia is not a mass-tourism destination but nevertheless has a diverse range of touristic products. In 2018, total of over 3.4 million tourists were recorded in accommodations, of which half were foreign.
Tourism is mainly focused on the mountains and spas of the country, which are mostly visited by domestic tourists, as well as Belgrade which is preferred choice of foreign tourists. The most famous mountain resorts are Kopaonik, Stara Planina, and Zlatibor. There are also many spas in Serbia, the biggest of which is Vrnjačka Banja, Soko Banja, and Banja Koviljača. City-break and conference tourism is developed in Belgrade and to a lesser degree Novi Sad. Other touristic products that Serbia offer are natural wonders like Đavolja varoš, Christian pilgrimage to the many Orthodox monasteries across the country and the river cruising along the Danube. There are several internationally popular music festivals held in Serbia, such as EXIT and the Guča trumpet festival.
Transport
Serbia has a strategic transportation location since the country's backbone, Morava Valley, represents by far the easiest route of land travel from continental Europe to Asia Minor and the Near East.Serbian road network carries the bulk of traffic in the country. Total length of roads is 45,419 km of which 915 km are "class-Ia state roads" ; 4,481 km are "class-Ib state roads" ; 10,941 km are "class-II state roads" and 23,780 km are "municipal roads". The road network, except for the most of class-Ia roads, are of comparatively lower quality to the Western European standards because of lack of financial resources for their maintenance in the last 20 years.
Airbus A330
Over 300 kilometers of new motorways has been constructed in the last decade and additional 142 kilometers are currently under construction: A5 motorway and 30 km-long segment of A2. Coach transport is very extensive: almost every place in the country is connected by bus, from largest cities to the villages; in addition there are international routes. Routes, both domestic and international, are served by more than 100 bus companies, biggest of which are Lasta and Niš-Ekspres., there were 1,959,584 registered passenger cars or 1 passenger car per 3.5 inhabitants.
Serbia has 3,819 kilometers of rail tracks, of which 1,279 are electrified and 283 kilometers are double-track railroad. The major rail hub is Belgrade, while the most important railroads include: Belgrade–Bar, Belgrade–Šid–Zagreb /Belgrade–Niš–Sofia , Belgrade–Subotica–Budapest and Niš–Thessaloniki. Although still a major mode of freight transportation, railroads face increasing problems with the maintenance of the infrastructure and lowering speeds. The rail services are operated by Srbija Voz and Srbija Kargo.
There are three airports with regular passenger traffic. Belgrade Nikola Tesla Airport served 5.6 million passengers in 2018 and is a hub of flagship carrier Air Serbia which carried some 2.5 million passengers in 2018. Niš Constantine the Great Airport is mainly catering low-cost airlines. Morava Airport is currently only served by Air Serbia.
Serbia has a developed inland water transport since there are 1,716 kilometers of navigable inland waterways, which are almost all located in northern third of the country. The most important inland waterway is the Danube. Other navigable rivers include Sava, Tisza, Begej and Timiş River, all of which connect Serbia with Northern and Western Europe through the Rhine–Main–Danube Canal and North Sea route, to Eastern Europe via the Tisza, Begej and Danube Black Sea routes, and to Southern Europe via the Sava river. More than 2 million tons of cargo were transported on Serbian rivers and canals in 2016 while the largest river ports are: Novi Sad, Belgrade, Pančevo, Smederevo, Prahovo and Šabac.
Labour
In 2018, the labour force was estimated at 3.24 million and employment stood at 2.83 million persons. Employment rate is comparatively low and stood at 47.6%; of those employed 15.9% worked in agriculture, 28.1% in industry, and 56% in services. The unemployment rate has been in double digits throughout the post-communist era, reaching peak at about 25% during the early and late 2000s. Since then, the rate has decreased substantially, with the creation of new jobs in primarily private sector, reaching 9.5% in 2020.According to the latest annual report of the Statistical Office of the Republic of Serbia, the net average monthly salary in January 2020 amounted to 59,941 Serbian dinars or 510 euros. In 2019 the net median salary amounted to 44 530 RSD or 379 euros, meaning that 50% of employees earned wages and salaries up to the mentioned amount.
Regional economies
The list includes statistical regions of Serbia by GDP, share of total GDP and GDP per capita in 2017:| Rank | Region | Total GDP | Share of total GDP | GDP per capita |
| 1 | Belgrade Region | 19.46 | 40.4% | 11,752 |
| 2 | Vojvodina | 12.77 | 26.5% | 6,612 |
| 3 | Šumadija and Western Serbia | 9.25 | 19.2% | 4,554 |
| 4 | Southern and Eastern Serbia | 6.64 | 13.8% | 4,249 |
Companies
The list includes ten largest Serbian companies by revenue in 2018 :The list includes ten largest Serbian companies by net income in 2018 :