Serbia: Growth slowdown only temporary?

Serbia's economy is currently navigating a phase of moderated growth, shaped by a complex mix of domestic challenges and global uncertainties. While the country has demonstrated resilience in recent years, recent GDP trends and forward-looking projections suggest a more cautious outlook for 2025 and 2026.

In May, inflation landed at 3.8% y/y, thus falling below 4% y/y for the first time in four years. Recent easing stems almost exclusively from lower oil prices, while food and housing costs remain sticky. Looking ahead, inflation is expected to continue on a downward path, reaching 3% y/y by year-end and stabilizing thereafter.

The monetary policy stance is likely to turn a bit more supportive going forward. However, the pace and scale of any further rate cuts will likely be gradual, as core inflation remains slightly elevated, and wage growth could pose upside risks if not aligned with productivity gains.

The mildly expansionary fiscal policy is expected to continue with deficits around 3% of GDP, propped up by further investment in infrastructure as part of the “Leap into the Future –Serbia Expo 2027” program in 2H25, but without disrupting the relative stability of the public debt-to-GDP ratio.

Political impasse continued in Serbia throughout 2Q25, and it does not seem as though the situation could change in the coming quarter.

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