Branimir Jovanović, an expert at the Vienna Institute for International Economic Studies, has warned that Serbia’s economic growth is slowing significantly, signaling what he describes as a “sad ending” to the long-promoted narrative of the country as an economic tiger.
In his latest analysis, Jovanović states that Serbia’s economy showed clear signs of crisis in 2025, with GDP growth dropping to around 2 percent, the lowest level since the COVID-19 pandemic. According to regional comparisons, neighboring economies outperformed Serbia, including Bosnia and Herzegovina, Montenegro, North Macedonia, Albania, and Kosovo, all recording higher growth rates. Even more developed regional economies such as Croatia and Bulgaria registered stronger economic expansion.
Declining Employment and Rising Emigration
Beyond GDP performance, the economic slowdown is also visible in the labor market. Employment figures in the third quarter of 2025 were approximately 50,000 lower compared to the same period in 2024. About half of this decline is attributed to job losses, while the other half is linked to emigration, raising concerns that not only unemployed individuals but also employed workers are leaving the country.
Jovanović argues that the Serbian economic model, heavily reliant on infrastructure spending and foreign direct investment, has proven unstable, comparing it to “a chair with only two legs.”
Foreign Investment Decline Driving Economic Weakness
A key factor behind the slowdown is the significant drop in foreign investment, which fell by roughly one-third in 2025. While Serbian authorities have blamed domestic political tensions for discouraging investors, Jovanović emphasizes that the decline reflects a broader global trend tied to weakening globalization and growing geopolitical instability.
He notes that global foreign investment levels fell to about 1 percent of global GDP in 2025, compared to approximately 5 percent in 2007, marking a long-term structural shift in global economic patterns.
Global Instability and Policy Uncertainty
Jovanović links the global investment slowdown to rising geopolitical tensions, particularly following the war in Ukraine and increasing divisions between Eastern and Western political blocs. He also highlights global economic policy uncertainty, partly attributed to decisions made by Donald Trump, whose trade tariffs, export restrictions, and controversial geopolitical proposals have increased unpredictability in international markets.
According to global economic policy uncertainty indices, levels of unpredictability reached historic highs in recent years, discouraging long-term investment planning worldwide.
Moderate Improvement Expected in 2026
Despite the current challenges, the Vienna Institute forecasts modest economic improvement for Serbia in 2026. GDP growth is projected to rise to 2.8 percent, inflation is expected to decrease from 4.1 to approximately 3.5 percent, and unemployment could slightly decline from 8.5 to 8.3 percent.
However, Jovanović stresses that these improvements will remain limited without structural reforms, as globalization is unlikely to return to previous levels and foreign investment will likely remain weaker than in earlier decades.
Need for a New Economic Model
The economist argues that Serbia must develop a third pillar of economic growth – domestic private investment, which currently remains among the lowest in Europe. He advocates for the introduction of a comprehensive industrial policy, encouraging government support for strategic sectors across all production stages, from research and development to manufacturing and marketing.
He cites examples such as Austria, which rebuilt its economy after World War II through industrial policy, and China, which has used similar strategies to become a global leader in electric vehicle production.
Political Change and Economic Reform
Jovanović also suggests that 2026 could be an election year in Serbia, potentially bringing political change. Nevertheless, he warns that a change in leadership alone would not be sufficient to improve economic conditions. He argues that sustainable growth requires both governance reform and the implementation of a new economic development strategy.
According to Jovanović, if Serbia successfully reforms its economic model, the country could begin achieving significantly stronger and more stable growth starting in 2027. While he cautions that Serbia may never become an “economic tiger,” he emphasizes that it can still develop into a stable and prosperous society offering improved living standards for its citizens.
