- GDP (PPP):
- $130.2 billion
- 4.2% growth
- 3.1% 5-year compound annual growth
- $18,989 per capita
- Inflation (CPI):
- FDI Inflow:
Serbia’s economic freedom score is 67.2, making its economy the 54th freest in the 2021 Index. Its overall score has increased by 1.2 points, primarily because of an improvement in the tax burden score. Serbia is ranked 30th among 45 countries in the Europe region, and its overall score is below the regional average but above the world average.
Serbia’s economy maintained its upward trajectory in the moderately free category this year. To increase that positive momentum toward greater economic freedom, the government should continue to improve the business and investment climates by strengthening the rule of law, especially by reforming the judicial system and directing more resources to the Anti-Corruption Agency.
IMPACT OF COVID-19: As of December 1, 2020, 1,652 deaths had been attributed to the pandemic in Serbia, and the economy was forecast to contract by 2.5 percent for the year.
Independent since the collapse of Yugoslavia in 1991, Serbia applied for membership in the European Union in 2009. A 2013 agreement normalized relations between Serbia and Kosovo. President Aleksandar Vucic’s center-right Progressive Party won three-quarters of the seats in parliament in June 2020 elections that were boycotted by the opposition, further cementing his hold on nearly every lever of power. Serbia cannot become a member of the EU without additional reforms, stronger rule of law, and improved relations with regional neighbors. In addition, EU membership risks displeasing Russia, with which Serbia has historical ties and upon which it remains dependent for energy. Serbia’s largely market-based economy relies on manufacturing and exports, and state-owned companies remain a significant presence in certain sectors.
Although there is adequate protection of property rights, enforcement can be very slow. Obtaining clear title to land is difficult and uncertain. Enforcement of contracts is weak. The judiciary and prosecutors are subject to undue political influence. Corruption remains a serious problem and reportedly is most pervasive in cases involving public procurement, natural resource extraction, and government-owned property.
The top individual income tax rate is 10 percent, and the corporate tax rate is a flat 15 percent. Other taxes include value-added and property taxes. The overall tax burden equals 20.7 percent of total domestic income. Government spending has amounted to 41.0 percent of total output (GDP) over the past three years, and budget surpluses have averaged 0.7 percent of GDP. Public debt is equivalent to 52.0 percent of GDP.
Serbia has made starting a business more complicated by requiring entrepreneurs to obtain an electronic certificate and register the final owners separately after incorporation. Labor costs are low compared to European averages. The IMF forecast that subsidies and transfers in the government’s budget would consume 16.2 percent of GDP in 2020.
Serbia has six preferential trade agreements in force. The trade-weighted average tariff rate is 6.4 percent, and nontariff barriers undercut overall trade freedom. Serbia is not a member of the World Trade Organization. The effect of institutional impediments to foreign investment is exacerbated by slow progress in reforming public administration and state-run companies. The small financial sector, dominated by banking, remains relatively stable.