While in the European Union they count and assess that they will drought almost canceling all the growth of the economy that they expected this year, the situation in Serbia is, as always, a little different. Individual sectors such as energy and agriculture are directly affected by the drought and low water level, but almost no one mentions the impact on tourism and the wider industry. This time, too, the Serbian authorities do not react in a timely manner. Inflation as a consequence is also not mentioned by anyone in the government, not even in the National Bank, although it is clear that there will be, he writes. Aleksandra Nenadović on the New Economy portal.
Failures and problems just keep coming one after the other - NIS sanctions, large electricity imports, reduced oil imports by barges, problems with water and electricity supply, as well as the departure of investors. All this, at the same time and for the most part unexpectedly, affected Serbian businessmen this year.
"The lack of water forced us to reduce production, almost to stop it. We now only have two shifts in which we work, and no third. In July, we were on a collective annual vacation and then this happened to us. Considering everything that is happening in the world, of course we have problems. And since inflation will rise, we are very afraid that our products will not be bought. And now consumption is reduced because people will not shop in the heat, they will not go to the stores," explains Dragoljub Vukadinović, president of Metalac Group from Gornji Milanovac.
His biggest fear is precisely related to the growth of inflation and the fall of GDP, because it also means reduced purchasing power of their customers. The only bright spot for this company in this situation is the long-term signed contract with Elektroprivreda Srbije, but not all businessmen have that. For those with short-term contracts, the price of electricity will rise, while the state has announced that it will not raise gas prices. For now, the short-term gas supply contract with Russia is still in force, and the question is whether it will be extended after political disagreements and the recent visit of Ukrainian President Volodymyr Zelensky to Serbia.
In addition to the impact on prices, the drought also poses a serious risk to economic growth, putting into question the projected growth of the gross domestic product (GDP) of three percent. Although it is still difficult to give a precise estimate of the damage, as the drought continues, it is clear that losses in agriculture and industry may lead to a decrease in the pace of economic activity.
Both GDP and inflation
Professor of the Faculty of Economics, Ljubodrag Savić, describes the situation as an elemental disaster caused by the sun and heat, which has not been seen before to such an extent. He states that there are major problems with agricultural crops, especially in certain areas, where corn, fruit and other products are affected, while only sunflower is safe.
"The reduced yield of these crops directly affects the supply of food and the increase in its prices. Due to the critically low water level of the Danube, the transport of goods is significantly more difficult. This inefficiency in transport increases the cost of delivering goods, which ultimately spills over into consumer prices. Due to the bad situation in Germany, foreign trade relations with this country as Serbia's largest partner and a large investor will also be damaged. Given that most countries in Europe and the world share similar problems with drought, these disturbances have a global character and contribute to the general inflationary pressure that is also felt on the domestic market," says Savić.
As reported by the world media, the long-term heat waves that affected Europe this summer threaten to completely cancel the expected economic growth for 2026. According to an analysis by Triodos Bank, the damage caused by extreme heat and forest fires is estimated at a cumulative 180 billion euros, which represents about one percent of the GDP of the European Union. Given that the EU's projected growth for this year was around 1,1 percent, these losses leave the bloc on the brink of complete economic stagnation.
The situation in Serbia is much more complicated than the one in the EU, because infrastructure systems have been completely neglected and no investment has been made in them, except for roads, electricity production has been in trouble since 2022 with increasingly worse forecasts, while the oil giant NIS is under sanctions. Economists expect that the damage to Serbia will be greater than that in the EU, proportionally speaking. There are also some specific situations related to our country, such as the cessation or large drop of water supply in several parts of Serbia, a serious reduction in the operation of the Đerdap hydroelectric power plant, which produces a third of the electricity, but also the breakdown in the Kostolac thermal power plant, due to which an entire block did not produce electricity, which the authorities tried to hide. And for the situation with water and electricity, at least as far as consumption is concerned, the citizens were only told that they should reduce it while there are no people responsible for all these problems.
The question of the extent to which certain factors can compensate for the damage caused in agriculture and production. Of those factors, Savić cites only construction as a positive contribution to growth, while everything else is questionable. Among the construction projects that drive growth are roads, but to the greatest extent it is the EXPO scheduled for next year.
Source: New Economy
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