SERBIA`S TRADE DEFICIT: MADE IN CHINA?

The trade deficit is one of the most consistent macroeconomic constraints of the Serbian economy, simultaneously reflecting negatively on the country’s external position. Despite the fact that during the observed period (2007-2023) the average export growth rate was higher than the import growth rate, the trade balance deficit has remained an unsolvable enigma for Serbian economic policymakers. The trend of decreasing the trade balance deficit, established after the global economic crisis, was interrupted in 2016 when it began to rise again. Simultaneously, since 2016, there has been more intensive economic cooperation between Serbia and China, especially in the merchandise trade. By the end of the observed period, China had become Serbia’s second most important foreign trade partner, which affected the reduction of the share of traditionally the most significant trade partners of Serbia in the trade of goods: Italy, Russia, and Bosnia and Herzegovina. The importance of China as a foreign trade partner is more evident on the import side, but in recent years, China has also become an increasingly significant export market for Serbia. This is understandable considering the fact that Chinese companies are currently the largest exporters from Serbia and key generators of export growth to China. The faster growth of imports from China compared to exports has led to an increase in the trade deficit with the Chinese economy. Compared to other major trading partners, Serbia has the highest trade deficit with China, which in 2023 accounted for more than half of Serbia’s total trade deficit. Given that the trade deficit is the key cause of the balance of payments imbalance in the domestic economy, reducing the trade deficit with China will be very important for improving Serbia’s balance of payments position.