Germany, the largest European economy, ended the year 2023 in a recession, with a 0.3% decline in gross domestic product (GDP), and estimates from analysts and experts suggest that the trend will continue into 2024.
Supply chain issues, persistent inflationary pressures (especially expensive energy resources), weaker demand for products, and high-interest rates have taken their toll, reports Blic, as conveyed by Business and Finance.
The consequences of negative economic trends in Germany are already being felt in Serbia, as President Aleksandar Vučić at the World Economic Forum in Davos noted that Serbia’s GDP would have grown “an entire percentage point more” in 2023 if there hadn’t been a decline in the German economy.
Serbia could endure significant consequences, explained Veljko M. Mijušković, an economist and lecturer at the Faculty of Economics in Belgrade. The impact of adverse events in the German economy on Serbia can be substantial, given the economic interconnectedness of the two countries.
“Germany is one of Serbia’s largest trading partners. If their economy experiences a recession or decline, it can reduce demand for Serbian export products, resulting in a negative impact on domestic exports and economic growth,” says Mijušković.
Furthermore, as stated, since German companies often invest in Serbia, creating new jobs and contributing to the country’s economic development, any worsening of the situation in the German economy could pose a risk of affecting investment decisions. There is a potential decrease in the inflow of foreign direct investments into Serbia from Germany.
Changes in the German economy can also impact global financial markets, including international investments in Serbia. If there is instability in the global markets, it will undoubtedly have a negative impact on the economic situation in Serbia.
“If German tourists reduce their travel due to this unfavorable situation, it can also be felt in domestic tourism, as it depends on visitors from European countries,” he says.
Mijušković emphasizes that if there is further deterioration in the German economy, it can have primarily negative consequences for Serbia’s export-oriented economy and the service sector. Specifically, the following sectors in Serbia could be affected: the automotive industry, metallurgy, agriculture and food industry, construction sector, and tourism.
“Serbia has a significant automotive industry sector, with the presence of several major manufacturers and suppliers. If there is a reduction in demand for vehicles or components in Germany, it will negatively impact domestic exporters in this industry,” says Mijušković.
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