**Serbia’s Banks Reach Record High Profits, But Economic Growth Forecast Drops**
Banks in Serbia have achieved a record high profit of 1.5 billion Euro in pre-tax earnings for the year 2024. This is the highest profit level since the banking sector was reformed in the early 2000s, according to a report by EY Consulting.
The high profits are largely due to the still-prevailing high-interest rate environment and the resulting high-interest rate margins. However, despite this financial success, Serbia’s economic growth has been cooling down. In the first half of 2024, the country experienced strong growth of 4.5% year-over-year (Y/Y), but in the second half, this slowed down to 3.3% Y/Y.
Experts at EY Consulting anticipate that Serbia’s growth will continue to slow down further, with a forecasted GDP expansion of 3.2% for 2025. This is a revision downward from their previous forecast and reflects various risks that have materialized in recent times.
The record high profits reported by banks in Serbia are a welcome development, but the slowing economic growth is a cause for concern. The government and financial institutions will need to take steps to address these challenges and ensure sustained economic growth.
**Commentary**
Serbia’s banking sector has shown remarkable resilience and adaptability in recent years. However, the cooling down of economic growth and the resulting revision downward of GDP forecast are worrying signs. The high-interest rate environment has provided a boost to banks’ profits, but it is unclear how sustainable this will be in the long term.
**Analysis**
The record high profits reported by banks in Serbia are largely due to the high-interest rate margins. However, this is not a reliable long-term strategy for sustained economic growth. The government and financial institutions should focus on implementing policies that promote economic diversification and development of other sectors beyond banking.
Furthermore, the slowing economic growth suggests that the country may be facing challenges related to debt levels, inflation, or other macroeconomic factors. It is essential for policymakers to address these concerns and develop strategies to ensure a more balanced and sustainable economic growth trajectory.
**Read More**
For more information on Serbia’s economy and banking sector, please visit the original article at [n1info.rs](https://n1info.rs/english/news/ey-serbian-banks-show-record-high-profits-but-gdp-forecast-drops/).