Serbia has made history by becoming the first country in the Western Balkans and the only EU candidate country to receive an investment credit rating from Standard and Poor’s (S&P), one of the three most reputable global credit rating agencies. This recognition comes with a BBB- rating and detailed forecasts for the country’s economic trajectory through 2027.
Economic growth projections
S&P’s analysis indicates that Serbia‘s GDP is expected to experience significant growth, reaching a nominal value of USD 111 billion by 2027. The report highlights anticipated increases in savings and investments, a stable dinar exchange rate, and a decrease in unemployment, inflation, and external debt.
By the end of 2023, Serbia’s GDP is projected at USD 87 billion, reflecting a growth rate of 3.9% compared to the previous year. This is expected to be followed by growth rates of 4.3% in 2024, 3.8% in 2025, and 3.6% in 2027. Additionally, unemployment is forecasted to decline from 9.5% to 7.7% over the same period, while investments relative to GDP are set to rise from 26.4% to 28.3%.
Inflation and public debt
S&P experts project inflation to be 4.5% by the end of 2023, decreasing to 3.4% in 2024, 2.8% in 2026, and normalizing at 2.5% by 2027. Total debt as a percentage of GDP is expected to decrease from 48.5% at the end of 2023 to 46.2% by 2027.
Positive indicators and challenges
S&P’s report indicates that stable GDP growth and prudent policy-making will help Serbia manage fiscal pressures and maintain a moderate level of public debt. While many indicators are positive, the agency also warned of potential obstacles. Key risks include Serbia’s vulnerability to external factors, such as prolonged economic weakness in the European Union, particularly in Germany and Italy, which are significant markets for Serbian exports. Additionally, Serbia’s reliance on Russian gas remains a concern, as does the slow progress in EU accession, which hinges on improving relations with Kosovo and aligning with Brussels’ sanctions against Russia.
Political analysis
The report also included a political analysis, noting that the ruling government has maintained policy continuity with a focus on reforms aligned with the International Monetary Fund (IMF) program. However, S&P cautioned that increasing centralization of decision-making within the government may undermine long-term policy predictability, potentially affecting investor confidence.
Official responses
Siniša Mali, Deputy Prime Minister and Minister of Finance, expressed satisfaction with the S&P rating, highlighting that it marks a historic achievement following a period of financial instability. He emphasized the resilience of Serbia’s economy, high foreign exchange reserves, and sustainable public debt levels as key factors contributing to this recognition.
While acknowledging the significance of the rating, some experts, such as former National Bank of Serbia Governor Dejan Šoškić, urged caution, noting that substantial benefits may not be immediately realized. Others, like Nicolas Marquier from the International Finance Corporation (IFC), pointed out that the rating upgrade reflects improved economic fundamentals and increased investor confidence.
The way forward
To maintain or improve its investment-grade status, Serbia must uphold sound fiscal and macroeconomic policies, manage risks effectively, and advance structural reforms. This includes rational public finance management, inflation control, and progress in EU accession negotiations. Strengthening institutions and expanding access to financial services are also vital to attract foreign investment and support sustainable economic growth.
