Serbia’s industrial production grew by just 0.1% year-on-year in the first eight months of 2026, despite estimated real GDP growth of approximately 3.6% over the same period, according to the October edition of Macroeconomic Analyses and Trends (MAT).
The figures point to a divergence between the wider economy and its manufacturing base, where weaker European demand, rising production costs and operational difficulties at major industrial facilities have constrained output. Industrial production fell 0.5% in August, with manufacturing contracting by 1.8%. Mining output increased by 6.7%, while electricity and energy supply rose by 0.8%, partially offsetting the manufacturing decline. The performance highlights Serbia’s continued reliance on a relatively narrow group of major industrial producers, whose operating conditions have a substantial influence on aggregate production and exports.
Automotive Growth Supports Manufacturing Output
Motor vehicle and trailer production increased by 12.5% year-on-year in August, supported by activity at Stellantis’ factory in Kragujevac, where production of the Fiat Grande Panda has contributed to the automotive manufacturing cycle. The automotive industry added 0.63 percentage points to the annual change in manufacturing output. Other positive contributions came from food processing, at 0.50 percentage points; chemicals, at 0.46 points; machinery and equipment, at 0.37 points; and electrical equipment, at 0.35 points.
Together, these five industries contributed 2.31 percentage points to manufacturing growth. Their gains were outweighed by contractions in other important manufacturing activities. Basic metals reduced manufacturing growth by 0.90 percentage points, pharmaceuticals by 0.83 points, and fabricated metal products by 0.78 points. The figures demonstrate how declining output in several industrial segments can offset expansion elsewhere. MAT analysts also reported that automotive production momentum had weakened in recent months, notwithstanding continued year-on-year growth.
NIS Refinery and HBIS Steelworks Face Different Pressures
The NIS refinery in Pančevo remains a major source of uncertainty for Serbia’s industrial sector following disruptions to production and supply arrangements associated with sanctions linked to Russian ownership. Although the refinery performed better in August than in earlier periods, petroleum processing continued to weigh negatively on cumulative industrial production. Uncertainty surrounding refining and fuel supply also affects transport operators, manufacturers, logistics companies and other businesses dependent on petroleum products.
At HBIS Serbia’s Smederevo steelworks, the principal challenges include weak European steel demand, tighter trade restrictions and additional regulatory requirements affecting exports to the EU. MAT analysts identified stricter EU steel import measures and requirements to document steel origin as significant risks for Serbian producers. These measures operate separately from the EU’s Carbon Border Adjustment Mechanism (CBAM), which imposes product-specific embedded-emissions and compliance obligations on covered steel imports.
The combination of trade restrictions and carbon-related requirements can increase administrative burdens, complicate export planning and constrain commercial flexibility for steel producers supplying European markets.
Industrial Concentration Creates Risks for Banks
Weak manufacturing performance has implications for banks providing industrial companies with working capital, equipment financing and loans for capacity expansion. Manufacturers exposed to softer EU demand may face lower capacity utilisation, slower collection of receivables and pressure on operating margins, even when domestic economic growth remains positive.
For steel, aluminium and other energy-intensive industries, lending assessments increasingly need to account for electricity and natural gas procurement costs, dependence on export markets, trade barriers and carbon-compliance obligations. The risks also extend to smaller businesses supplying major industrial facilities. A slowdown at a refinery, steelworks or automotive factory can affect transport providers, maintenance contractors, industrial-service companies, component manufacturers and equipment suppliers.
Consequently, overall economic growth may provide an incomplete picture of individual industrial borrowers’ financial performance. When evaluating new manufacturing investments, lenders need to distinguish businesses benefiting from sustained growth in European demand from those dependent on temporary production recoveries or a limited number of industrial customers.
Manufacturing Investment Faces Pressure to Diversify
Serbia continues to attract manufacturing investment, with industrial diversification increasingly focused on advanced manufacturing, renewable energy equipment, electrical components and higher-value exports. However, the latest production figures show that additional capacity has not yet offset weakness in established industrial activities.
The challenge is particularly relevant to the country’s efforts to improve productivity and expand exports. Investment in new factories alone cannot eliminate exposure to uncertain European demand, high energy costs and limited market diversification. Industrial performance during the remainder of 2026 will depend heavily on the operational stability of NIS, the competitiveness of HBIS Serbia and the ability of automotive production to sustain its recent growth.
