Serbia is expected to maintain a higher level of imports compared to exports this year. Although the coverage of imports by exports stands at a robust nearly 80 percent, this figure would have been even higher without the impact of the recent drought, which has negatively affected both the Electric Power Industry of Serbia (EPS) and agriculture. In July alone, electricity production dropped by 15 percent, and agricultural outcomes from the season are still under review, with preliminary data showing less-than-encouraging results. As essential services like electricity and food remain indispensable, the trend of imports surpassing exports is likely to persist.
Other sectors in Serbia, such as mining and IT, which are largely export-oriented, continue to perform well. While there is a steady demand for copper from Bor and steel from Smederevo, the Serbian processing industry, which focuses more on domestic consumption, is faring better during these times.
Industrial production in Serbia grew by 2.5 percent in the first seven months of the year, a notable achievement given the challenging economic climate across Europe. In contrast, industrial production in the EU declined by approximately 3 percent, and Central and Eastern European countries saw an average drop of about 2 percent. Serbia’s industrial success is partly due to its reliance on traditional sectors, such as basic chemicals, whose demand remains stable even in crises. However, this reliance on traditional industries may not be sustainable in the long term.
Despite the summer’s volatility in industrial production, which saw a decline in May followed by a rise in June and a further correction in July, Serbia’s manufacturing sector remains resilient. The Raiffeisen Bank analysis notes that weaker demand from the EU, compounded by high financial costs and new geopolitical risks, continues to challenge the sector.
Serbia’s export performance is overshadowed by rising imports, with agricultural production also under strain due to drought conditions. According to Erste Group analysts, exports grew by 4.4 percent year-on-year, but this was eclipsed by an 8.5 percent increase in imports, reducing net export growth by 3.6 percentage points.
The electricity sector, facing long-term challenges, saw a 6 percent decline in production compared to last year, with a more significant 15 percent drop in July. The decline is attributed to unfavorable hydrological conditions affecting hydropower production. Although EPS’s financial indicators have slightly improved, the sector still struggles with inadequate coal reserves and high electricity prices.
Mining, on the other hand, has shown positive growth, with copper ore and concentrate exports reaching approximately $1.5 billion annually, following the acquisition of RTB Bor by the foreign company Zijin. However, the benefits of this growth for Serbia are still under analysis.
Agriculture has also been hit hard this year, with declines of 3.7 percent and 4.1 percent in the first and second quarters, respectively. The drought’s impact on agriculture is significant but temporary. If weather conditions improve, strong growth is anticipated next year.
To mitigate the economic impact of such adverse conditions, there is a need for increased investment in sectors like agriculture and energy, as well as a more strategic approach to addressing climate change. The Fiscal Council emphasizes that predictable and purpose-driven agricultural subsidies are crucial, rather than ad hoc responses to immediate crises. A long-term plan is essential for sustainable development across various economic sectors.
