This paper studies the impact of the world economic crisis on the Serbian economy with a special reference to banking sector and external economic (in)stability. Primary goal of the paper was to test to how much extent was Serbian external economic stability jeopardized by the global economic meltdown and what might be consequences of the apparent external imbalance. Additionally, we tried to examine what are the effects of the crisis on banking sector in the context of potential future instability. Our analysis brought us to conclude that the external imbalances have just become more visible in the crisis period. The real reason for these imbalances was actually inadequate growth model led by the policy makers, based on consumption and unstable inflows of foreign capital. On the other hand, during the crisis period, banking sector have shown quite solid performances while its stagnation was just a consequence of the real sector slowdown. Our conclusion is that banking sector was professionally led, highly capitalized and shall not be a trigger for some future crisis. According to the performed analysis, Serbia needs dramatically different economic growth model in the future, mainly export oriented and with a more strict external borrowing policy
