Press Release No. 25/427

Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the Second Review under the Policy Coordination Instrument (PCI) for the Republic of Serbia. The authorities have consented to the publication of the Staff Report prepared for the review.[1]

Economic activity has slowed amid rising domestic and external challenges. Real GDP growth is estimated at around 2 percent in 2025, before recovering to 3 percent in 2026. Headline inflation has eased to below the National Bank of Serbia’s target of 3 percent. The current account deficit is expected to widen in 2026, reflecting higher fuel import costs and EU restrictions on steel imports, before moderating from 2027.

Downside risks to the outlook are elevated but are mitigated by prudent macroeconomic policies and sizable buffers. Ample foreign exchange reserves, government deposits, and a resilient well-capitalized banking sector provide important support in navigating current challenges. Resolving the sanctions on the macro-critical oil company NIS would further reduce uncertainty.

Continued prudent policies are essential to safeguard credibility. Fiscal deficits are on track to remain below the agreed 3 percent of GDP ceiling, a key program anchor, supported by contained current spending and careful investment prioritization. A restrictive monetary policy stance, including looking through temporary price fluctuations from recent price and margin controls, helps contain inflation risks stemming from minimum wage increases and higher energy cost.

Advancing structural reforms remain crucial. Fiscal transparency and accountability are being strengthened through continued reforms in public financial and investment management. Under new program commitments, public arrears are expected to begin declining from 2026. Diversifying natural gas supplies would further strengthen energy security, while recent increases in household electricity tariffs have improved the financial sustainability in state-owned energy enterprises, supporting critical energy investments going forward.

At the conclusion of the Executive Board’s discussion on the Republic of Serbia, Mr. Bo Li, Deputy Managing Director, made the following statement:

“Growth has slowed amid domestic protests and heightened energy-security risks following sanctions on the macro-critical oil company NIS. Prudent macroeconomic policies, supported by strong engagement with the IMF, have helped Serbia build fiscal and external buffers that are proving valuable in navigating the current challenging environment. The government has met its deficit target and the National Bank of Serbia (NBS) has maintained appropriately tight monetary policy. The Policy Coordination Instrument (PCI) continues to anchor policy credibility and reinforce the authorities’ commitment to structural reforms.

Risks, including those linked to NIS resolution, have increased significantly, underscoring the need for continued prudent policies. The authorities’ priority is to maintain the fiscal deficit anchor of 3 percent of GDP or below, which requires strict adherence to wage and pension rules, investment prioritization, and careful contingency planning. This discipline will preserve fiscal space to respond to shocks and support the continued decline in public debt. The authorities remain committed to strengthening public financial and investment management, including by clearing existing arrears and preventing new ones.

Monetary policy should maintain a tightening bias, especially as recent margin and price controls could obscure some near-term inflationary pressures. The authorities’ commitment to phase out these controls helps maintain investor confidence in a market-based economy. While the banking sector is resilient, the NBS is continuing to work on improvements in regulatory and supervisory frameworks. Of particular importance are close monitoring of credit developments and a strengthening in AML/CFT frameworks.

Energy-sector reforms remain critical amid risks to energy security. Diversifying natural gas sources would further strengthen Serbia’s energy supplies. Recent increases in household electricity tariffs have improved the financial position of state-owned energy enterprises. Indexing future tariff increases to inflation would further support cost recovery and enable investment in a more diversified energy mix.”

Serbia: Selected Economic and Social Indicators, 2024–27   2024   2025   2026   2027   Est.   PCI 1st rev Proj.   PCI 1st rev Proj.   PCI 1st rev Proj. Output                     Real GDP growth (%) 3.9   3.0 2.1   4.0 3.0   4.5 4.6                       Employment                     Unemployment rate (labor force survey) (%) 8.6   8.5 8.7   8.4 8.8   8.3 8.7                       Prices                     Inflation (%), end of period 4.3   3.3 3.0   3.2 5.0   3.2 3.2                       General Government Finances                     Revenue (% GDP) 40.5   40.9 40.7   40.4 40.8   40.1 40.3 Expenditure (% GDP) 42.4   43.9 43.7   43.4 43.8   43.1 43.3 Fiscal balance (% GDP) -2.0   -3.0 -3.0   -3.0 -3.0   -3.0 -3.0 Public debt (% GDP) 47.0   46.8 45.2   46.5 44.7   46.4 44.4                       Money and Credit                     Broad money, eop (% change) 13.6   7.8 8.4   8.0 7.8   8.8 9.2 Credit to the private sector, eop (% change) 1/ 8.5   9.3 14.1   9.6 13.8   10.5 13.7                       Balance of Payments                     Current account (% GDP) -4.5   -5.4 -5.2   -5.6 -6.0   -4.5 -4.9 FDI (% GDP) 5.6   4.4 3.0   4.8 4.0   4.4 4.2 Reserves (months of prospective imports) 7.3   7.0 6.7   6.5 6.0   6.5 6.0 External debt (% GDP) 61.2   61.3 58.8   59.3 55.9   54.8 51.9                       Exchange Rate                     REER (% change) 2.3   … …   … …   … …                        Sources: Serbian authorities and IMF staff estimates.  1/ Calculated at a constant exchange rate to exclude the valuation effects.

 

[1] 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.