Serbia

Serbia is an upper-middle-income country and the largest economy in the Western Balkans. Serbia has achieved remarkable macroeconomic stability. Fiscal consolidation brought the budget deficit to 2.4% of GDP in 2025, down from an average of 5.2% during 2010- 2014. Similarly, public debt has been on a downward path, declining from a peak of 68.3% of GDP in 2015 to 45% of GDP in 2025.

However, the economic model that allowed Serbia to achieve growth rates averaging 3.5% in the last 5 years—based, inter alia, on robust Foreign Direct Investment (FDI) flows, a fiscal stimulus, increased workforce participation and cost competitiveness—needs to be refreshed. Amid geo-economic turbulence, including the conflict in the Middle East, demographic change, domestic political uncertainty and an unfinished reform agenda, economic growth in Serbia is slowing down.

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Serbia’s economic growth decelerated to 2% in 2025, following a more robust 3.9% expansion in 2024, resulting from internal and external pressures, reflecting relatively weak consumption amid relatively high inflation and lower investment.

On the production side, services sector was the only significant driver of growth. The construction posted the largest drag on growth (of 0.7 percentage points), while adverse weather conditions had a notable effect on agriculture. Manufacturing made only a marginally positive contribution to growth.

Serbia has achieved strong fiscal performance. The economic slowdown of 2025 did not affect the collection of revenues which, together with the lower expenditures, led to a lower-than-expected fiscal deficit. Domestic political uncertainty has, however, slowed the implementation of key structural reforms including on the EU accession front.

Economic growth is expected to rebound in 2026, as consumption and investment recover. The incidence of poverty remained broadly flat at 7.8% in 2025 and is projected to continue falling, albeit at a slower rate, as the remaining poor are often characterized by chronic unemployment.

Over the medium term, the Serbian economy is expected to grow at around 3-4%, driven primarily by consumption and, to some extent, investment. Downside risks include global and domestic uncertainty and the ability to undertake important ‘second generation’ reforms to boost growth and job creation and accelerate convergence with the EU.

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The World Bank Group's program for Serbia, guided by the FY2022-2026 Country Partnership Framework, amounts to $830 million in IBRD loans across 13 active projects.

The program offers policy advice and financing in areas such as public financial management, transport (railways and local mobility), real estate management/business environment, R&D and innovation, competitive agriculture, capital markets development, public sector efficiency (including digitalization of selected public services and tax modernization), green transition, energy efficiency health, and primary education.

Two projects of regional character are facilitating economic integration by improving connectivity along the Drina and Sava River corridors and enhancing trade and transport in the Western Balkans.

A key area of the World Bank Group engagement in Serbia is supporting the digital transformation of public administration through the $50 million Enabling Digital Governance project (EDGE). Implemented by the Office for IT and eGovernment, it improves the efficiency, quality and accessibility of e-government services by strengthening digital infrastructure, data interoperability, service reengineering, and digital skills to enable more transparent and citizen-centered governance.

The World Bank Group is actively supporting the development of the financial sector and capital markets in Serbia through its Joint Capital Markets Program (J-CAP). This initiative has achieved notable milestones, including the issuance of green and corporate bonds and adoption of Environmental, Social, and Governance (ESG) standards.

IFC’s portfolio in Serbia totals $511 million across nine high-impact investments in both infrastructure and the financial sector, while MIGA holds significant exposure with gross commitments of $3.09 billion in nine projects of which six in the financial sector and three in infrastructure. MIGA’s guarantees are supporting sustainable transport, improved wastewater treatment, financial inclusion, and Serbia’s green agenda by expanding access to finance for micro-, small-, and medium-sized enterprises (MSME) and promoting climate finance activities.

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The World Bank Group's program for Serbia is guided by the FY2022 – 2026 Country Partnership Framework (CPF), now extended through FY2028. The CPF focuses on supporting Serbia's efforts to strengthen its institutions to accelerate economic growth in a fiscally and environmentally sustainable manner and promote more inclusive service delivery.

Key areas for World Bank Group support include maintaining macroeconomic stability and public sector reform, fostering a competitive business environment, enhancing regional connectivity, improving institutional capacity for reform implementation and monitoring, and strengthening human development.

The CPF also emphasizes cross-cutting institutional strengthening and policy reforms to promote greener, more resilient growth, focusing on both fiscal and budgetary measures as well as green sectoral investments. Additionally, it aims to enhance the capacity of local self-governments to deliver services effectively, including those related to job creation, skills development, and local economic opportunities.

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