IMF: Serbian economy to grow 3 pct in 2025 and 4 pct in 2026

BELGRADE - The Serbian economy will grow by 3 pct in 2025 and 4 pct in 2026, with the projected growth "driven by the government’s investment program and the expansion of export capacities in the manufacturing sector," the International Monetary Fund (IMF) said in a statement after completing weeks-long discussions with Serbian authorities in Belgrade on Wednesday.

"IMF staff and the Serbian authorities have reached staff-level agreement on the First Review under the Fund’s Policy Coordination Instrument (PCI) subject to approval by the IMF Executive Board," it said.

"Headline inflation has fallen back within National Bank of Serbia’s target band, supported by declining energy prices and moderating core inflation. Monetary policy is appropriately restrictive and should continue maintaining a tightening bias amid upside risks to prices.

The external trade balance has weakened compared to last year, reflecting accelerating imports associated with Serbia’s public investment drive and sluggish exports amid a challenging global environment. Foreign direct investment inflows have moderated but together with exports are projected to continue supporting the accumulation of foreign exchange reserves from already ample levels," it also said.

"Downside risks to the outlook are elevated. A global growth slowdown and increasing geoeconomic fragmentation could negatively affect exports and foreign direct investment. Domestically, political tensions may weigh on confidence. But Serbia has built up substantial buffers to respond to shocks — foreign exchange reserves and government deposits are high, public debt is declining, and banks are well-capitalised and liquid.

Preserving the track record of prudent macroeconomic policy is also key to mitigating risks. Fiscal restraint is essential to maintain policy credibility in an uncertain economic environment and to preserve room for a countercyclical policy response in case of adverse shocks. The authorities remain committed to limiting the fiscal deficits to no more than 3.0 pct of GDP over 2025-27 and to adhering to the fiscal rules on public wages and pensions. Any additional spending needs should be accommodated within the 3.0 pct of GDP deficit ceiling through careful public investment prioritisation and budget reallocation. This balanced approach to infrastructure, social, and other spending priorities will keep public debt on a downward path, reinforcing fiscal credibility and investor confidence.

Continued efforts to ensure transparent, accountable, and efficient government operations remain crucial. The authorities are strengthening public financial management, including fiscal transparency, and public investment management. Public investment management can be further enhanced through more advanced cost-benefit analyses, fiscal risk assessments, and sound procurement practices. Energy sector reforms are advancing but more remains to be done to ensure financial sustainability and operational efficiency in state-owned enterprises," it also said.

"In the medium term, contributions to growth from labour and capital accumulation will moderate as the population ages and the pace of public investment normalises following the completion of the investment cycle. Maintaining high economic growth in Serbia would hinge on raising productivity, encouraging private investment by domestic firms, and securing Serbia’s attractiveness for foreign direct investment. This calls for reforms to strengthen the business environment, including modernising labor market regulations, digitalising the public sector and the judiciary, and tackling governance challenges," the IMF said.

An IMF mission led by Annette Kyobe was on a visit to Belgrade between May 28 and June 11 to discuss economic and structural policies.