Serbian economy has shown resilience to recent shocks - World Bank report

BELGRADE - The Serbian economy has shown resilience to recent shocks thanks to a prudent fiscal policy and efforts to reduce public debt, says a new World Bank report, released on Monday.

"Growth has been supported by consumption, investment, rising labour force participation, and low unemployment. Public debt is now below 50 pct of GDP, and Serbia obtained its first investment-grade credit rating in 2024," the report said.

"Serbia’s integration into European value chains has led to higher foreign investment, exports, job creation, and growth than in other Western Balkan countries," the World Bank said.

"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," it noted.

The report also gives policy recommendations "to support Serbia’s progress towards EU membership and a high-income status, while strengthening the country’s resilience to demographic changes, persistent gender disparities, and growing climate-related risks."

The recommendations are as follows:

"- Deepen efforts to reduce the informal economy (estimated at 33 pct 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 pct of GDP in increased revenues, fiscal savings, and efficiency gains."