The Serbian economy entered 2026 facing a complex macroeconomic landscape characterized by modest growth and structural shifts within its industrial sector. According to the February 2026 report from MAT – Macroeconomic Analyses and Trends, Serbia experienced economic expansion in 2025, although the growth rate significantly declined compared to previous years. The real GDP growth averaged around 2% for the year, with a year-on-year increase of 2.2% recorded in the final quarter.
Despite avoiding recessionary pressures that have affected parts of Europe’s manufacturing sector, Serbia’s growth trajectory has weakened compared to the rapid post-pandemic recovery phase. A notable indicator of this slowdown was industrial production, which saw only a 0.9% increase throughout 2025. This modest growth was attributed to both domestic disruptions and deteriorating conditions in European manufacturing markets, with total industrial production dropping by 5.7% year-on-year in December.
The manufacturing sector faced significant challenges, as production within this industry contracted by 8.3% in December, overshadowing gains made in other sectors like mining and energy supply. Conversely, mining activity demonstrated relative stability, with a 4.7% increase in production during 2025. However, electricity and energy supply only marginally grew by 0.7% in December, failing to offset the manufacturing decline.
Analysis of the industrial structure reveals that only 12 out of 29 industrial branches recorded growth in physical production volume during 2025, indicating that a substantial portion of Serbia’s industrial sector is stagnating or contracting. A critical factor influencing these trends is the broader slowdown in European manufacturing, as Serbia’s industrial system is closely integrated into European supply chains, particularly those linked to Germany and Italy.
The MAT report indicates that the European industrial sector is currently facing structural challenges rather than cyclical ones, with key indicators such as the Purchasing Managers’ Index (PMI) remaining below the expansion threshold. As of January 2026, the PMI was noted at 49.5 for the European Union, with Germany at 49.1 and Italy at 48.1, reflecting ongoing weakness in industrial demand.
Germany’s economic condition is particularly relevant for Serbia as it serves as the largest trading partner and a crucial component of European industrial supply networks. The slowdown in German manufacturing has reverberated through supplier industries across Central and Eastern Europe. Additionally, rising unemployment in Germany, which reached 6.6%, has further dampened consumer demand and investment confidence throughout the European industrial landscape.
Despite these structural challenges, some sectors within Serbia’s industrial framework exhibited resilience and growth potential. The automotive industry emerged as a key driver of industrial expansion in 2025, particularly following the introduction of electric vehicle production with the Fiat Grande Panda model at the Kragujevac factory. Throughout the year, output levels for motor vehicles and trailers surged approximately 60% above those recorded in 2024.
This automotive sector expansion significantly contributed to overall manufacturing output and export performance, adding 1.8 percentage points to the total 1.1% growth of the manufacturing sector during 2025. Exports from this industry reached €4.057 billion, making it Serbia’s largest export sector and accounting for 12.3% of total exports.
Germany remained the primary destination for Serbian automotive exports, representing 30.5% of total sector exports, followed by Italy at 14% and Hungary at 9.5%. The rise of electric vehicle production underscores Serbia’s increasing integration into Europe’s transition towards electric mobility and its potential role as a manufacturing hub within this evolving supply chain.
However, this success also highlights a structural vulnerability as Serbia’s export growth has become overly concentrated within a limited number of industrial sectors. The automotive sector alongside rubber and plastics manufacturing and machinery production constitutes a significant portion of export growth, raising concerns about potential risks stemming from sector-specific shocks or shifts in European market demand.
In addition to automotive advancements, the rubber and plastics industry also reported strong growth during 2025 with a production increase of 16.6%, alongside an export expansion worth €405.5 million and generating a trade surplus of €1.098 billion as a vital supplier to European manufacturing chains.
Nonetheless, geopolitical challenges impacted even this sector; notably, the U.S. imposed a ban on imports from the Linglong factory in Zrenjanin due to labor condition concerns, which could affect future export performance.
Energy production dynamics were also pivotal during this period; hydropower generation suffered significantly during the first half of the year due to drought conditions, resulting in an overall decline of 18.5%. However, improved weather conditions later allowed for partial recovery with increases noted towards the end of the year.
The oil refining industry experienced drastic disruptions as well; production plummeted by an alarming 94.3% in December due to uncertainties surrounding operations at the Pančevo refinery owned by Naftna Industrija Srbije (NIS), which is influenced by geopolitical tensions related to Gazprom Neft’s majority stake.
In terms of external trade performance for Serbia in 2025, total foreign trade turnover reached €74.927 billion—a rise of 7.7% from the previous year—with exports amounting to €33.068 billion against imports totaling €41.859 billion, yielding a trade deficit of €8.791 billion.
Manufacturing accounted for an impressive 87.6% of total exports, reinforcing its central role within Serbia’s export model while improving coverage ratio slightly to reach 79%. Notably, December marked a milestone where monthly export capacity exceeded €2.8 billion for the first time.
Trade relations remained heavily focused on Europe with EU countries making up approximately 63.8% of total trade exchanges; Germany continued to be Serbia’s largest trading partner accounting for about 13.3% of total trade volume.
Key Serbian exports to Germany included rotating electrical machines valued at €686 million and electricity distribution equipment worth €596 million—further confirming Serbia’s deep integration into Europe’s industrial ecosystem reliant on EU demand for its export growth.
Overall developments throughout 2025 indicate an economy undergoing gradual structural transformation while simultaneously revealing vulnerabilities tied to slowing industrial growth rates, energy sector disruptions, and concentrated export activities across select industries.
