Serbia’s economic outlook remains mixed as the country faces both global headwinds and domestic challenges. However, Fitch Ratings has maintained a Positive Outlook on Serbia’s ‘BB+’ rating, reflecting confidence in the country’s policy consistency and macroeconomic stability.
Slower Growth and External Challenges
Serbia’s flash GDP estimate for the first quarter of 2025 showed a 2.0% increase from the previous year, marking a noticeable slowdown. High-frequency indicators, including industrial production, retail trade, and economic sentiment in the services sector, have all pointed to a cooling economy. Net trade contributed to this weaker growth, with exports falling by 1.6% in US dollar terms, while imports surged by 8.7%. However, this alone may not fully explain the slowdown, and more clarity is expected when the full breakdown of first-quarter GDP contributors is released in early June.
Fitch Ratings had already revised its 2025 real GDP growth forecast for Serbia from 4.2% to 3.8% in March, citing a challenging external environment. If the first-quarter data confirms further weakness, this could signal additional downside risks, especially given the global trade tensions impacting eurozone economies.
Despite these pressures, Serbia’s external buffers remain robust, with international reserves totaling EUR 31.6 billion. However, these reserves declined by EUR 894 million in the first quarter, largely due to net foreign-currency sales by the National Bank of Serbia (NBS), reflecting increased demand for foreign currency amid domestic and external uncertainties.
Political Stability and Economic Policy Continuity
On the political front, Serbia’s parliament approved the appointment of Duro Macut as Prime Minister on April 16, following the resignation of his predecessor, Milos Vucevic, in January. Vucevic stepped down amid public protests following a tragic railway station accident in Novi Sad, which sparked widespread student-led demonstrations.
While these protests have been more sustained than previous anti-government movements, they have focused primarily on concerns about centralization of power and corruption, rather than economic policy. As a result, Fitch expects limited impact on Serbia’s macroeconomic stability, with the current government maintaining a focus on investment-led growth and fiscal discipline.
Macut, a doctor and academic with no prior political experience, was nominated by President Aleksandar Vucic. His government has signaled a commitment to economic continuity, retaining several key ministers responsible for financial policy. This aligns with Fitch’s assessment in January that the current political climate is unlikely to disrupt Serbia’s economic strategy.
Outlook and Key Policy Drivers
Looking ahead, Serbia’s economic strategy includes the ‘Leap into the Future – Serbia Expo 2027’ initiative, aimed at promoting investment-led growth. Fiscal policy remains anchored to an IMF program supporting debt reduction, despite increased capital expenditures. These policies have helped Serbia achieve significant economic gains, including an almost 80% increase in GDP per capita in US dollar terms between 2018 and 2024.
