The performance of Serbia’s industrial sector in 2025 has been significantly influenced by disruptions in the oil refining industry, highlighting serious strategic risks related to energy security. According to the February 2026 issue of MAT – Macroeconomic Analyses and Trends, while the country maintained modest macroeconomic growth and export expansion, a critical industrial shock—the decline in petroleum refining linked to Naftna Industrija Srbije (NIS) and the Pančevo refinery—had a disproportionate effect on overall production dynamics.
The implications of this disruption extend well beyond the refining sector, impacting manufacturing stability, trade performance, fiscal expectations, and Serbia’s vulnerability to geopolitical pressures tied to energy ownership. Industrial production in 2025 saw a mere 0.9% increase, falling short of projections, with the MAT analysis identifying the refining crisis as a key factor for this underperformance.
This decline became most pronounced in the last quarter of 2025. December saw total industrial production drop by 5.7% year-on-year, with manufacturing output contracting by 8.3%. The segment responsible for coke and petroleum products experienced a staggering 94.3% decrease in output compared to December of the previous year, reducing its production index to just 6.5 relative to the 2024 average.
The MAT report indicates that this was not merely a temporary setback; rather, it reflects a continuous decline throughout 2025. From May to September, production in the coke and petroleum products sector had already decreased by approximately 10% year-on-year. The situation worsened further with declines of around 30.3% in October and nearly 44% in November, culminating in near-total operational halts by December. Recovery efforts began only in late January 2026.
The refinery sector’s significance arises from its central role within Serbia’s energy-industrial framework, influencing fuel availability, input costs, logistics, and trade in refined products. The MAT report underscores that the decline in this sector alone accounted for much of the broader manufacturing contraction observed at year-end. Consequently, it suggests that without the refinery crisis, Serbia’s industrial performance could have aligned more closely with initial forecasts.
The root causes of this vulnerability are tied to NIS’s ownership structure, predominantly held by Gazprom Neft. The uncertainty surrounding sanctions against this Russian entity has intensified operational challenges. Initial hopes for legal arrangements permitting NIS to function normally under international sanctions have diminished as full sanctions implementation and supply interruptions through JANAF have complicated matters further.
This situation illustrates that Serbia’s energy risk encompasses not only commodity price fluctuations but also ownership dynamics intertwined with international political relations. The constraints on industrial output stemmed more from political uncertainties than from market demand or production inefficiencies.
The ramifications extend across multiple economic facets when a crucial industrial asset faces international sanctions. The reduced output from the refinery directly impacts domestic production statistics while also hindering export volumes and complicating planning for industries dependent on consistent fuel supplies.
Trade data corroborate these findings; exports from the coke and petroleum products sector fell by €66.4 million, or 14%, compared to the previous year. This downturn is significant given that manufacturing constitutes 87.6% of total exports for Serbia, which recorded total foreign trade turnover of €74.927 billion in 2025.
Additionally, the NIS crisis unfolded against a backdrop of broader energy challenges affecting industrial performance. The MAT report highlights that electricity, gas, steam, and air conditioning supplies—accounting for 15.3% of total industrial production—faced a prolonged downward trend beginning in late 2023 before stabilizing mid-2025 due to increased thermal electricity generation and solar energy contributions.
Hydropower generation was notably impacted by drought conditions starting April 2025, leading to significant year-on-year declines despite some recovery towards year-end. Overall hydropower output for 2025 ended approximately 18.5% lower than in 2024.
These two forms of energy vulnerability—climate-related variability affecting hydropower and geopolitical risks surrounding oil refining—compound Serbia’s energy risk landscape beyond simple supply-demand considerations.
Industrial statistics reveal how swiftly these risks translate into macroeconomic consequences; mining grew by 4.7%, manufacturing expanded only by 1.1%, while the electricity sector declined by 1.8%, resulting in an overall industrial production increase of just 0.9%. The modest annual outcome reflects not only weak external conditions but also domestic energy disruptions.
The interplay with European economic weakness exacerbated these issues; major eurozone trading partners were experiencing challenging industrial phases as indicated by manufacturing PMI figures below expansion thresholds across several countries.
The timing of the NIS crisis coincided with an already fragile macroeconomic environment, limiting potential offsets from strong export performances in other sectors like automotive production and rubber manufacturing.
The automotive industry generated €995.7 million in additional exports during 2025, representing a substantial portion of manufacturing export growth alongside rubber and plastics sectors contributing another €405.5 million.
Despite some mitigating factors from these sectors, Serbia’s industrial framework has become increasingly reliant on a narrow range of growth drivers. A failure within one pivotal energy-industrial branch places additional pressure on a select few export champions to maintain overall industrial performance—a scenario that poses risks for medium-term resilience.
Looking ahead to March 2026, market participants are closely monitoring developments regarding MOL Group’s intent to acquire a majority stake in NIS as part of efforts to stabilize refining operations amid sanctions exposure concerns.
This transaction is crucial as it signals potential pathways toward resolving ownership issues that affect operational stability within Serbia’s refining sector—not solely through market mechanisms but also via political-legal restructuring.
Fiscal implications are also evident; Serbia’s budget deficit reached RSD 271.4495 billion (2.6% of GDP) in 2025—a situation exacerbated by declining refinery operations affecting tax collections and overall industrial activity amidst rising public expenditures.
Balance-of-payments data indicate that the current account deficit rose by €3.4801 billion during the first eleven months of 2025 while net foreign direct investment fell sharply by over half compared to previous levels.
In times when FDI inflows are diminished alongside widening current-account deficits, maintaining confidence in strategic industrial assets becomes paramount for international investors and lenders alike.
At a structural level, the NIS crisis raises questions about Serbia’s broader industrial policy direction amid calls for revisions that address vulnerabilities linked to ownership structures and geopolitical risks affecting critical energy inputs.
While external dependencies will persist due to Serbia’s integration into European trade networks, it is essential for policymakers to recognize that certain dependencies pose greater risks than others—highlighting the need for secure control over key energy resources amid complex geopolitical landscapes.
As Serbia navigates these challenges into 2026 and beyond, understanding the intersections between energy infrastructure management and broader economic policy will be vital for ensuring sustainable industrial growth amidst evolving global conditions.
