Serbia's Economic Governance
and Competitiveness
A comprehensive baseline assessment of Serbia's economic governance through the lens of competitiveness and EU accession preparedness.
Executive Summary
A decade of growth with structural weaknesses
Serbia has achieved commendable macroeconomic stabilization and sustained convergence. Public debt has fallen to 45% of GDP, FDI inflows have been substantial, and employment has risen significantly. However, productivity convergence remains slow, governance indicators have been diverging from EU benchmarks, and regional inequalities have intensified.
A competitiveness squeeze is emerging
The policies that produced growth have generated a manufactured form of Dutch Disease. Since 2016, the real exchange rate has appreciated by more than 20%. Manufacturing wages have outstripped productivity growth. Closures among foreign-owned manufacturers are accelerating. SME export performance has deteriorated for the first time since 2015.
Executive dysfunction lies at the root
The problem is a fundamental dysfunction in the operation of the executive branch, rooted in administrative practices inherited from the Yugoslav self-management system. Over-prescriptive regulation, absent goal-setting, and fragmented competences make managerial accountability logically impossible.
The path forward requires institutional reform
Progress requires fundamentally changing how authority is assigned, how judgment is permitted, and how accountability operates within the executive. Serbia's convergence prospects depend on building institutional capacity for broad-based, rules-based governance.
Key Findings
Estimated time until productivity convergence with EU at current rates
State aid for large FDIs (€434M) vs SMEs (€48M) — structural disadvantage for domestic firms
Real effective exchange rate appreciation since 2016, eroding export competitiveness
Record public investment in 2024, yet largest projects bypass standard appraisal procedures
Report Sections
The report covers macroeconomic foundations, trade competitiveness, executive governance, budget allocation, and specific policy areas under the Reform Agenda.
Introduction
Assessment of Serbia's economic governance through the lens of competitiveness and EU accession criteria
A Decade of Uneven Convergence
Overview of Serbia's socio-economic convergence with the EU over the past decade
The Trade Competitiveness Challenge
Analysis of Serbia's emerging competitiveness squeeze and manufactured Dutch Disease
A Dysfunctional Executive
How deep administrative dysfunction and political parallelism undermine Serbia's business environment
Resource Allocation as Revealed Priorities
Analysis of Serbia's budget structure revealing governance constraints and spending patterns
State Aid and Industrial Policy
Assessment of Serbia's state aid architecture and its alignment gaps with EU requirements
Public Investment and Procurement
Assessment of public investment management and procurement contestability in Serbia
Conclusion
Baseline diagnosis and indicators of progress for Serbia's economic governance reform
About This Report
This is a baseline report that assesses Serbia's economic governance through the lens of competitiveness, understood as the capacity of the domestic economy to generate broad-based and inclusive productivity growth under competitive pressure. CEVES aims to update this assessment on an annual basis.
The analysis brings two perspectives: first, it goes beyond macroeconomic stability to focus on the drivers of growth and their structural footprint. Second, it examines how deep, legacy flaws in Serbia's administrative system undermine the capacity of the executive branch and the effectiveness of governance overall.
Learn More About CEVES