Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the 2025 Article IV Consultation with the Republic of Serbia and completed the first review of Serbia’s performance under the Policy Coordination Instrument (PCI).[1] The authorities have consented to the publication of the Staff Report prepared for the consultation and the review.[2]
Serbia’s macroeconomic performance remains resilient amid a challenging global environment. IMF staff projects real GDP growth at 3 percent in 2025, rising to 4 percent in 2026 and 4.5 percent in 2027. Headline inflation has returned to National Bank of Serbia’s target band (3 percent +/-1.5 percentage points), driven by declining energy prices and moderating core inflation. The monetary policy stance is appropriately restrictive.
Despite increased public investment, the fiscal deficit remains under control due to strong revenue performance and prudent management of current spending. While the current account deficit has widened, reflecting higher imports supporting the public investment drive and weak external demand, international reserves remain ample.
Fiscal structural reforms are progressing, including in further strengthening public financial management and public investment management. Energy sector reforms are also advancing but more remains to be done to ensure financial sustainability and operational efficiency in state-owned energy enterprises. Reinvigorating reforms to strengthen the business environment and improve governance is important for supporting Serbia’s growth rates over the medium term.
Downside risks to the outlook are elevated. A global slowdown and further geoeconomic fragmentation could weigh on exports and foreign direct investment. Domestically, heightened political tensions could erode consumer and investor confidence. But Serbia is well-positioned to manage potential shocks— international reserves and government deposits are high, public debt is declining, and banks are well-capitalized and liquid.
At the conclusion of the Board discussion on the Republic of Serbia, Ms. Gita Gopinath, First Deputy Managing Director, made the following statement:
“Serbia’s prudent macroeconomic policies and strong engagement with the IMF have delivered impressive results. Growth has been resilient, and fiscal and external buffers have strengthened. Reflecting these accomplishments, Serbia received its first-ever investment grade sovereign rating in 2024. Under the Policy Coordination Instrument (PCI), the Serbian authorities have continued their commitment to sound economic policies and structural reforms.
“In light of easing inflation and heightened domestic and external challenges, the planned fiscal expansion focused on growth-enhancing investment, can help cushion the near-term slowdown while boosting medium-term growth. Fiscal policy anchored to the deficit target, which safeguards hard-earned fiscal credibility and contains pressures on current spending, is critical. As the current investment cycle winds down, gradual fiscal consolidation is needed to rebuild buffers against external shocks. Advancing fiscal structural reforms remains essential, particularly to strengthen public financial management, enhance governance and transparency in public investment management, and address emerging fiscal risks.
“A restrictive monetary policy stance remains appropriate until disinflation is firmly sustained. While banks have been resilient and systemic risks remain contained, financial intermediation would benefit from additional improvements in regulatory and supervisory frameworks, including by closer alignment with EU standards. Continued progress on strengthening AML/CFT is also important.
“Further energy reforms remain crucial for securing sustainable and stable energy supplies. Increases in grid fees and electricity tariffs would improve cost recovery and the financial strength of energy state-owned enterprises and allow for investment in a more diversified and less carbon-intensive energy mix.
“Serbia faces medium-term challenges including from population aging. Enhancing productivity will be critical to sustaining income convergence with advanced economies. This will require structural and governance reforms to attract higher value-added FDI and domestic private investment to support growth. Improving the business environment will require measures to enhance commercial judicial frameworks, foster innovation, and strengthen governance.”
Executive Board Assessment[3]
Executive Directors agreed with the thrust of the staff appraisal. They commended Serbia’s prudent macroeconomic policies and strong commitment to reforms and welcomed the satisfactory performance under the Policy Coordination Instrument. Noting the heightened domestic and external risks to the outlook, Directors emphasized the importance of sustaining fiscal discipline, rebuilding buffers to shocks, and increasing productivity to support more sustainable growth.
Directors underscored that a fiscal deficit of 3.0 percent of GDP or lower would allow for priority investment spending, while preserving hard won credibility. They recognized the authorities’ commitment to adhere to the wage and pension special fiscal rules, which should help to keep public debt firmly on a downward path and support investor confidence. Directors welcomed the focus on ensuring transparent, accountable, and efficient government operations. Measures to improve public financial and investment management and fiscal risk management will help to maintain fiscal discipline, while ensuring the delivery of quality public investment. Directors also underscored the need to strengthen tax administration capacity. They welcomed the authorities’ commitment to addressing domestic arrears and preventing the accumulation of new arrears.
Directors agreed on the need to maintain a monetary policy tightening bias to achieve sustained disinflation. While noting that the banking sector has been resilient and systemic risks remain contained, Directors stressed the need for continued efforts to enhance regulatory and supervisory frameworks, including through closer alignment with EU standards. Continued efforts to strengthen AML/CFT frameworks are also important.
Directors highlighted that energy sector reforms remain essential to secure sustainable and stable energy supplies and support decarbonization. Accordingly, they welcomed the authorities’ commitment to strengthen the financial viability of energy state owned enterprises and support investment in a more diversified energy mix. In this regard, ensuring cost recovery through increased household electricity tariffs is important.
Directors agreed that ambitious structural and governance reforms are critical to achieving strong and sustainable medium term growth. Noting the impact of the aging population, Directors stressed the need to enhance employment opportunities for women and youth and to ensure better matching of skills with evolving labor market demands. They also supported intensified efforts to improve the business environment, including by enhancing commercial judicial frameworks, fostering innovation, and improving governance. Continued efforts to reduce corruption are important.
It is expected that the next Article IV consultation with the Republic of Serbia will be held on the 24-month cycle.
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Serbia: Selected Economic and Social Indicators, 2024–27
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2024
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2025
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2026
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2027
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Est.
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PCI Request
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Proj.
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PCI Request
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Proj.
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PCI Request
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Proj.
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Output
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Real GDP growth (%)
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3.8
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4.2
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3.0
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4.2
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4.0
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4.5
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4.5
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Employment
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Unemployment rate (labor force survey) (%)
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8.6
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8.5
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8.5
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8.4
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8.4
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8.3
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8.3
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Prices
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Inflation (%), end of period
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4.3
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3.4
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3.3
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3.3
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3.2
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3.2
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3.2
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General Government Finances
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Revenue (% GDP)
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40.9
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41.2
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40.9
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40.9
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40.4
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40.9
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40.1
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Expenditure (% GDP)
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42.9
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44.2
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43.9
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43.9
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43.4
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43.9
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43.1
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Fiscal balance (% GDP)
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-2.0
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-3.0
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-3.0
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-3.0
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-3.0
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-3.0
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-3.0
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Public debt (% GDP)
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47.5
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47.7
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46.8
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46.9
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46.5
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46.4
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46.4
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Money and Credit
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Broad money, eop (% change)
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13.6
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8.0
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7.8
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7.8
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8.0
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8.3
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8.8
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Credit to the private sector, eop (% change) 1/
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8.5
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7.9
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9.3
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5.7
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9.6
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9.2
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10.5
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Balance of Payments
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Current account (% GDP)
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-4.7
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-5.1
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-5.4
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-5.2
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-5.6
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-5.5
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-4.5
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FDI (% GDP)
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5.6
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5.1
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4.4
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4.8
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4.8
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4.7
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4.4
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Reserves (months of prospective imports)
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7.3
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6.6
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7.0
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6.3
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6.5
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5.9
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6.5
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External debt (% GDP)
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61.9
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60.3
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61.3
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58.7
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59.3
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55.9
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54.8
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Exchange Rate
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REER (% change)
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2.3
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…
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…
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…
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…
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…
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…
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Sources: Serbian authorities and IMF staff estimates.
1/ Calculated at a constant exchange rate to exclude the valuation effects.
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[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
[2] Under the IMF's Articles of Agreement, publication of documents that pertain to member countries is voluntary and requires the member consent. The staff report will be shortly published on the www.imf.org/Serbia page.
[3] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.
