Professor Milojko Arsić from the Faculty of Economics discusses the impact of the political crisis on Serbia’s economic performance, highlighting the need for a new political and economic system to ensure long-term stability. He emphasizes that the political crisis, fueled by corruption and citizens’ dissatisfaction, is contributing to a decline in economic activity.
Arsić points out that Serbia’s economic indicators for the first two months of 2025 show lower-than-expected growth, influenced by both domestic and global factors. He notes that weak economic performance in Germany, Serbia’s main trading partner, and increased business costs, particularly in sectors like textiles and automotive cable production, are contributing to the downturn.
The Serbian Oil Industry’s production decline and international sanctions on NIS have further exacerbated the situation. Additionally, foreign direct investment has dropped, partly due to political instability and uncertainties in key investor countries like Germany, Italy, and China. Arsić warns that the political crisis is negatively affecting foreign investment, which is crucial for Serbia’s economic future.
While the political turmoil has not significantly impacted trade, Serbia’s trade deficit continues to grow, particularly in the second half of 2024. Arsić emphasizes that these negative trends in exports and imports were already in place before the political crisis.
On the issue of VAT revenue, Arsić explains that the slight decline in April is a result of overall economic activity slowing down, though it is not yet a dramatic deterioration. He also suggests that the slower VAT collection could indicate reduced consumer spending as citizens hold off on purchases due to economic uncertainty.
Arsić concludes that Serbia needs to focus on attracting higher-value investments and fostering innovation to transition from the lower-middle-income status to a more highly developed economy. This requires a well-educated workforce and state support for technological advancements. Serbia must move away from low-wage, low-productivity jobs and focus on industries that can support higher wages and greater economic growth.
