Economic activity in Serbia slowed down during the first five months of 2025, with an estimated GDP growth of 2.2 percent—significantly lower than the same period last year.
Despite this slowdown, positive trends are visible in industrial production and exports, largely driven by the automotive sector, according to the latest “Macroeconomic Analysis and Trends” (MAT) report.
Automotive industry boosts manufacturing
GDP growth of 2.2 percent in January-May represents a 2.4 percentage point decrease compared to last year. The services sector remained the main growth driver, while industry contributed 0.4 percentage points. Construction, in contrast to the previous year, showed a negative impact on growth.
In May, industrial production increased by 4.4 percent year-on-year, with the manufacturing sector growing by 7 percent. The key contributor was the automotive industry, following the launch of the new electric Fiat Grande Panda model at the FCA Srbija factory in Kragujevac.
The production of motor vehicles and trailers saw particularly strong growth in March, April, and May. In May alone, this sector accounted for 2.5 percentage points of the manufacturing industry’s growth—over one-third of the total increase.
Trade deficit narrows significantly
Foreign trade also showed strong recovery. In May, merchandise exports rose by 17.3 percent year-on-year, while imports grew by 6.8 percent, reducing the trade deficit by nearly 27 percent.
Import coverage by exports reached 83.7 percent—the best level since 2016 and 2017, when it slightly exceeded 84 percent.
Retail trade rebounded as well, with turnover increasing by 5.6 percent in May after previous months of slowdown.
Inflation trends downward but remains above EU average
Inflation continued to ease, reaching 3.8 percent annually in May—the lowest since June 2024. Although still above the EU average of 2.2 percent, inflation in Serbia remains lower than in five EU countries, including Romania and Hungary.
Forecasts and risks
For 2025, MAT projects industrial production growth of 2.7 percent, export growth of 7.5 percent, import growth of 11.5 percent, and retail sales growth of 2.9 percent. Inflation is expected to settle at 3.5 percent by the end of the year.
However, analysts warn of key risks ahead. The impact of U.S. tariffs under the Trump administration may disrupt European auto production, though Serbia’s automotive sector could help cushion the blow.
Another concern is the uncertain future of the Oil Industry of Serbia (NIS), partially owned by Russian investors, with its operating license set to expire at the end of July. Stabilizing NIS operations is critical, especially given the regional importance of the Pančevo refinery.
Overall, while Serbia faces some economic headwinds, strong automotive production and export growth remain bright spots supporting the country’s economic outlook.
