In the first quarter of 2025, Serbia’s imports surged seven times faster than its exports, raising concerns about a potential balance of payments crisis similar to the economic turmoil faced by Greece, Argentina and Turkey. According to the Republic Institute of Statistics (RZS), Serbia’s exports amounted to 7.35 billion euros, marking a modest 1.8% increase compared to the same period last year. However, imports grew by 12.4%, reaching 10.24 billion euros. This resulted in a deficit of approximately 2.9 billion euros, a 52.8% increase compared to the first quarter of 2024.
Experts attribute the decline in exports to weak demand in Europe, Serbia’s main export market, while imports are rising due to strong domestic demand and the availability of cheaper imported goods. This trade imbalance has been a persistent issue for several years, with Serbia consistently importing more than it exports. The National Bank of Serbia (NBS) has intervened in the foreign exchange market by selling foreign currency to help cover the deficit.
In past years, foreign direct investments (FDI) helped offset the current account deficit. However, the situation has worsened, with net FDI inflows in the first two months of 2025 dropping to 340 million euros — a 64% decrease compared to the same period last year. Gross FDI inflows during January and February amounted to 435 million euros, representing a 59% decline from the previous year.
Additionally, capital outflows based on earlier FDI have compounded the situation. The total outflow of primary income related to FDI was 420.7 million euros in the first two months of 2025, further diminishing the net FDI inflow.
Although the current situation is not yet alarming, experts warn that Serbia must adopt a new model of economic growth to prevent a future crisis. Instead of relying on foreign investments, the focus should shift toward producing quality domestic goods. Milojko Arsić, a professor at the Faculty of Economics in Belgrade, stressed that Serbia must act proactively, as continued deterioration of its trade balance could eventually lead to a balance of payments crisis.
Arsić pointed out that Serbia is still far from an immediate crisis, due in part to its large foreign exchange reserves, which could finance the trade deficit for several years. However, if reserves continue to decline over a prolonged period, the situation could become more critical.
The professor also highlighted that Serbia’s exports are suffering due to reduced demand in Europe and a decrease in the price competitiveness of domestic products. As wages in Serbia have risen in euros, the cost of domestic goods has increasingly approached that of European products, diminishing their competitiveness in the market.
Arsić recommends two possible solutions to improve the situation: enhancing the quality of Serbian products or adjusting wages and exchange rates. The latter, he argued, would be detrimental to the economy. Instead, Serbia should focus on improving the structure of its economy to create products that can support the current wage levels and exchange rate.
The short-term trade deficit may not be immediately concerning, but experts warn that it poses a long-term challenge that needs to be addressed to ensure sustainable economic growth.
