Serbia’s Manufacturing Sector Loses More Than 18,000 Jobs Amid Industrial Weakness

Serbia’s manufacturing sector recorded 18,178 fewer registered employees in the third quarter of 2026 compared with the same period a year earlier, accounting for most of the national employment decline despite continued economic growth.

Data published by the Statistical Office of Serbia (RZS) on October 29 show that total registered employment fell by 19,347 people, or 0.8%, to 2,346,398. Manufacturing employment declined by approximately 3.7% year-on-year to 468,300 workers.

The contraction has persisted throughout the year. Manufacturing employment was down 15,937 in the first quarter and 17,422 in the second quarter compared with the corresponding periods of 2025, before the annual decline widened to 18,178 in July–September. These are year-on-year comparisons rather than cumulative quarterly job losses. Total registered employment also decreased by 9,542 compared with the second quarter, indicating further weakness in the labour market.

Employment declines across several sectors

Manufacturing accounted for the largest part of the national reduction, but other sectors also recorded lower employment. Wholesale and retail trade had 5,096 fewer workers, mining lost 1,269, and education recorded a decline of 1,531.

Employment in registered companies and other legal entities decreased by 19,818, while the number of entrepreneurs, their employees and people independently conducting business increased by 3,597. Registered individual agricultural producers declined by another 3,126.

The figures indicate that growth in smaller businesses and self-employment has partly offset reductions among established companies, but has not compensated for the losses in manufacturing and other sectors. The employment data contrast with economic growth supported by household consumption, services and selected industrial investments. The manufacturing figures indicate that this expansion has not translated into additional jobs across the industrial workforce.

Factory closures add to pressure on manufacturers

Recent restructuring announcements illustrate the challenges facing labour-intensive manufacturing companies operating in Serbia. Italian textile group Golden Lady announced that it would close its Valjevo factory by the end of 2026, putting 737 jobs at risk while consolidating production at its remaining Serbian facility in Loznica. The company cited weaker European hosiery demand, lower sales in Russia and rising operating costs.

Turkish-owned textile manufacturer Kaizen entered liquidation in Smederevo, affecting approximately 350 employees. Together, the two developments put more than 1,000 manufacturing jobs at risk.

These announced closures do not explain the third-quarter employment decline, as their latest employment consequences fall outside the July–September reporting period. They nevertheless illustrate the commercial pressures confronting manufacturers exposed to international competition. Serbia attracted foreign manufacturing investment over the past two decades through investment incentives, competitive labour costs, access to European markets and industrial infrastructure. This model supported employment growth in automotive components, textiles, electrical equipment and other export-oriented industries.

Higher wages, demanding customers and competition from alternative production locations have changed the operating environment. Manufacturers relying primarily on lower production costs face pressure when productivity gains do not keep pace with increases in wages, energy, logistics and other expenses.

Industrial output shows limited growth

The employment decline coincides with weak industrial production. RZS data show that total industrial output fell 0.5% year-on-year in August, while manufacturing production decreased 1.8%. Across January–August, industrial output increased by only 0.1%.

Production and employment do not necessarily follow the same trajectory. Companies may increase output while reducing their workforce through automation, process improvements, outsourcing or more intensive equipment utilisation. Conversely, weaker orders can lead to job reductions even when existing production facilities remain operational. The aggregate figures do not establish how much of the manufacturing employment decline is attributable to productivity improvements, factory closures, weaker demand or investment restructuring.

The distinction is important in assessing industrial performance. Employment reductions accompanying technological modernisation may reflect higher productivity, while losses caused by declining production capacity, reduced orders or factory closures would indicate a different set of challenges.

Higher labour costs increase productivity requirements

Manufacturers are also facing rising labour expenses. According to RZS, average net wages increased 11.4% nominally and 8.5% in real terms during January–August 2026 compared with the same period a year earlier. Higher wages support household purchasing power but raise operating costs for companies competing internationally, particularly where manufacturers have limited ability to increase selling prices.

The impact differs across industries. Automotive assembly, electrical equipment and technologically advanced manufacturing may absorb higher wages through automation and greater output per employee. Textile production and basic assembly activities typically operate with narrower margins and greater exposure to lower-cost competitors. For Serbia, the industrial policy challenge involves attracting investment in activities that can deliver higher productivity, stronger domestic supply chains and sustainable employment. This requires technical skills, industrial infrastructure, reliable energy supplies and investment incentives linked to measurable economic performance.

Regional industrial centres face employment risks

The consequences of manufacturing job losses can be particularly significant outside Belgrade. Industrial employment is concentrated in parts of Vojvodina, Šumadija, western Serbia, and southern and eastern Serbia, where large factories can represent major sources of household income and local economic activity. The closure of an individual employer can affect more than its direct workforce, extending to transport companies, suppliers, maintenance contractors and local service providers.

Workers leaving manufacturing may also face difficulties finding comparable employment without additional training, particularly in municipalities with limited industrial diversification. New investments in other regions or sectors do not necessarily create opportunities accessible to workers displaced from existing factories. A detailed assessment of the transition would therefore require regional employment statistics, factory-level restructuring data and information about occupations most exposed to technological and commercial changes.

Industrial employment trends affect lenders and investors

The decline also has implications for banks and investors financing manufacturing operations. Significant workforce reductions can reflect lower factory utilisation, weaker order books, production restructuring or a shift towards automation. Lenders need to distinguish between companies reducing employment while improving productivity and those cutting jobs because of deteriorating demand or financial pressure.

Relevant indicators include operating cash flow, export contracts, capacity utilisation, labour productivity, energy expenditure and planned investment requirements. For companies receiving investment incentives, employment commitments also need to be assessed against actual operating performance and the durability of the jobs created. Programmes measured only by initial employment announcements may not capture subsequent restructuring, deteriorating competitiveness or factory closures.

Growth forecasts contrast with industrial employment losses

The World Bank expects Serbia’s economy to expand by approximately 3.1% in 2026 and 3.7% in 2027, supported by consumption, selected industrial recovery and services activity.

The forecasts underline the differences in performance between sectors. Serbia’s manufacturing development will increasingly depend on automation, workforce skills, supplier competitiveness, technological investment and deeper integration into European industrial supply chains.

Foreign investment remains an important part of the industrial model, but the quality and resilience of new projects will be increasingly relevant alongside factory-opening announcements and projected employment figures. The national decline of 19,347 registered employees represents 0.8% of total employment, while manufacturing alone accounted for 18,178 fewer workers in the annual comparison for the third quarter.