Serbia’s economy is experiencing slower growth than expected, with this year’s GDP growth forecasted at 3.2 percent, down from the planned 4.2 percent, according to Ernst & Young (EY).
After strong growth of 4.5 percent in the first half of 2024, growth slowed to 3.3 percent in the second half. Data from early 2025 suggest a continued slowdown, with global risks such as protectionist policies, renewed inflationary pressures, and geopolitical tensions impacting growth prospects in Serbia. The downturn is particularly influenced by weakening economies in the EU, notably Germany and Italy, key trade and investment partners for Serbia. This has led to lower demand for Serbian exports and reduced foreign investment.
Despite these challenges, trade with non-European countries, such as China and Turkey, has provided some relief. However, various sectors in Serbia are feeling the strain. The export-oriented processing industry, like automotive parts production, is suffering from reduced foreign demand, while agriculture and energy are impacted by dry weather conditions. Mining, on the other hand, is benefiting from increased demand from China and rising raw material prices.
Household consumption has become the primary driver of economic growth, but this trend presents potential risks. Consumption growth shows signs of slowing, and retail consumption growth has dropped significantly, from 5 percent in 2024 to just 1 percent in early 2025. Serbia also faces structural challenges, including labor shortages and rising labor and energy costs, which limit the competitiveness of its exporters.
Inflationary pressures are mounting due to external factors, and the dinar is facing mild depreciation. The National Bank of Serbia has resumed interventions in the foreign exchange market, keeping the reference interest rate at 5.75 percent since September 2024. This rate is expected to remain steady throughout the year as inflationary pressures persist.
While Serbia’s fiscal position remains stable, the slowdown in consumption is leading to slightly reduced tax revenues. The fiscal deficit could widen in 2025, with the IMF predicting an increase to 3.3 percent of GDP, compared to 2.1 percent in 2024.
