Serbia is set to face significant borrowing in 2025 due to a growing budget deficit, with interest payments alone expected to reach 1.9 billion euros. Chief economist of the Fiscal Council, Danko Brčerević, criticized past economic decisions, particularly unplanned distributions to citizens and pensioners, and the state’s coverage of losses from poorly managed public energy companies. These actions led to unfavorable borrowing conditions, and Serbia is now paying the price.
While Serbia’s economy can bear the interest expense, Brčerević believes that better economic choices could have avoided it. He pointed out that other European countries like Romania and Poland also face rising interest costs, but unlike Serbia, they are struggling with fiscal problems.
The increase in the budget deficit to 3% of GDP in 2025 is not yet a critical issue, though Brčerević warns that the fiscal policy has shifted in the wrong direction. From 2017 to 2023, Serbia maintained a stable budget, with temporary pandemic-related expenses not threatening long-term stability. However, from 2024, the introduction of costly multi-year projects like EXPO has pushed the deficit higher, necessitating a suspension of fiscal rules that had aimed for a 1.5% deficit in 2025.
The higher deficit will require new borrowing, raising Serbia’s public debt from 39.3 billion euros to 41.9 billion euros in 2025. This will result in significant interest expenses, as borrowing conditions remain unfavorable. Brčerević questioned whether the long-term benefits of projects like EXPO or the National Stadium would justify this new debt and called for transparency through justification studies for such projects.
Brčerević also addressed the issue of wage and pension increases, noting that pension hikes are legally defined and economically sound. Public sector wage increases are capped to ensure they do not outpace the economy’s ability to finance them.
