The report outlines policy recommendations to support Serbia’s progress toward European Union membership and a high-income status, while strengthening the country’s resilience to demographic changes, persistent gender disparities, and growing climate-related risks.
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Background
Serbia’s economy has shown resilience to recent shocks, aided by prudent fiscal policy and efforts to reduce public debt. Growth has been supported by consumption, investment, rising labor force participation, and low unemployment. Public debt is now below 50% of GDP, and Serbia obtained its first investment-grade credit rating in 2024. Serbia’s integration into European value chains has led to higher foreign investment, exports, job creation, and growth than in other Western Balkan countries.
However, Serbia’s performance looks less favorable when benchmarked against European Union new member states. In particular, Serbia lags in firm productivity and in the quality of public service delivery and institutions.
Key Policy Recommendations
- Deepen efforts to reduce the informal economy (estimated at 33% of GDP), with a particular focus on accelerating the shift toward cashless payments.
- Introduce a carbon tax in response to the Carbon Border Adjustment Mechanism (CBAM), to ensure that carbon adjustment revenues are retained domestically and reinvested in sectors critical for the green transition.
- Implement both immediate and longer-term policy actions that could collectively contribute up to 7% of GDP in increased revenues, fiscal savings, and efficiency gains.