EXPORT OF SERVICES AS A GENERATOR OF ECONOMIC GROWTH IN SERBIA: THE EXPORT OF SERVICES’ DYNAMICS AND MEDIUM-TERM PROJECTIONS

Abstract

Contrary to what characterized most of the 20th century, when the benefits of industrialization were associated with the growth of international merchandise trade, the benefits of international trade are currently primarily generated by the exchange of services. In this paper, we try to answer how to encourage the transformation of the economy that would enable greater relative importance of export-oriented service activities, emphasising the particularly propulsive IT sector. From 2000 to the present, the share of service exports in fast-growing total exports has significantly increased, and this growth has been incredibly intense in the last decade (rising from 26.4% in 2014 to 33.6% in 2024), implying its growth importance in contributing to total exports. This can largely be explained by the growing share of IT sector exports, and NBS projections point to the continuation of that positive trend. The spread of digitalization, which relies on the IT sector, will remain a significant generator of growth in service exports and GDP, mainly due to faster growth in total factor productivity. The increase in the importance of the export of services is also connected with their dominant and growing role in generating economic activity, and it is estimated that service activities will be 'responsible' for as much as three-quarters of the achieved GDP growth in 2027.

Based on the projected accurate growth rates of total exports and merchandise exports in 2024-2029, we calculated the real growth rates of service exports. Considering that the projected GDP growth rate in the next five years is 4.1%, the obtained average growth rate of services exports of 5.43% indicates that, ceteris paribus, it will positively affect GDP growth. The faster growth dynamics of service exports, in relation to the GDP growth rate, were also characteristic of the previous 24 years.