Serbia’s economy expanded by an estimated 2.2% year on year in the first five months of 2025, according to the latest edition of the Macroeconomic Analysis and Trends (MAT) report published on July 7.

The report, compiled by the country’s Economics Institute, highlights the recent slowdown in Serbia’s gross domestic product (GDP) growth after the country posted a robust 3.9% expansion in 2024, one of the highest in Europe.

The slowdown comes amid global and domestic political uncertainty, weakening external demand from major European trade partners and declining inflows of capital and foreign direct investment.

Serbia’s economy grew by 2.0% in the first quarter of 2025, down sharply from 3.3% in the final quarter of 2024. The current growth pace falls significantly short of the government’s original 2025 target of 4.2%.

Both the National Bank of Serbia and international institutions, including the International Monetary Fund and the World Bank, have lowered their 2025 growth forecasts for Serbia to 3.5%, citing increasing global volatility and worsening external conditions.

From a sectoral perspective, the MAT report identifies “other services” as the main driver of growth, while industry contributed around 0.4 percentage points. Industrial output rose by 4.4% y/y in May, with the processing sector posting a solid 7% gain.

Trade data pointed to double-digit growth in foreign trade, with exports up 17.3% and imports rising 6.8%, helping to narrow the trade deficit by 26.8%. The import-export coverage ratio improved to 83.7%, approaching record levels previously seen only in September 2016 (84.0%) and April 2017 (84.5%).

Domestic consumption showed signs of recovery in May following weakness in previous months. Retail trade turnover at constant prices grew by 5.6% year-on-year, suggesting a rebound in household spending.

Inflationary pressures also eased. Monthly inflation stood at 0.3% in April and 0.2% in May, while annual inflation fell to 3.8% in May, its lowest level since June 2024. Year-on-year inflation has declined for four consecutive months, reflecting domestic stabilisation and easing global price pressures.

The Serbian economy remains resilient, though risks remain skewed to the downside amid geopolitical tensions and an uncertain political outlook following months of anti-government protests.