World Bank Projects 2.8% Growth for Serbia in 2025, Highlights Potential for Doubled Expansion with Reforms

Serbia's 2025 Economic Growth Projected at 2.8%

The World Bank has projected Serbia's economic growth to reach 2.8% in 2025. This updated forecast represents a downward revision from the 3.5% estimated in June, as detailed in the World Bank's latest 'Western Balkans Regular Economic Report No. 28 Fall 2025: Towards Better Jobs', published in October 2025.

The report indicates that Serbia's economy 'has lost momentum' following a strong performance in 2024. This slowdown is primarily attributed to lower private investment and reduced net foreign direct investment (FDI) inflows, influenced by global uncertainty and domestic political instability. Economic activity in the first half of 2025 slowed to an estimated 2%, largely due to a significant decline in construction activities and weaker agricultural output, both impacted by adverse climatic conditions.

Structural Reforms Crucial for Accelerated Growth

Despite the revised forecast, the World Bank emphasizes Serbia's substantial potential for accelerated economic expansion. Richard Record, the World Bank's lead country economist for the Western Balkans, stated that Serbia's growth rate 'could be as much as doubled in the years ahead' with the implementation of appropriate structural reforms.

These critical reforms are centered on several key areas:

• Strengthening governance
• Boosting human capital
• Unlocking greater levels of productivity
• Attracting FDI in greenfield and higher-value added sectors
• Increasing spending on research and development (R&D)
• Enhancing regulatory quality and government effectiveness
• Promoting financial development
• Improving female labor force participation

Nicola Pontara, World Bank Country Manager for Serbia, highlighted that escaping the 'middle-income trap' necessitates a shift towards an innovation-driven economy that boosts productivity and integrates domestic firms into EU and global value chains.

Medium-Term Outlook and Identified Risks

Looking beyond 2025, the World Bank projects that Serbia's economic growth will recover to a range of 3% to 4% in the medium term, with forecasts of 3% in 2026 and 4% in 2027. This growth is expected to be driven primarily by consumption and, to some extent, by investment.

However, several downside risks could impede this recovery. These include potential budgetary support for struggling state-owned enterprises, weaker external demand for Serbian exports amidst global trade policy uncertainty, and the impact of extreme weather events on agriculture and infrastructure. Despite these challenges, Serbia has demonstrated strong macroeconomic performance, maintaining a low fiscal deficit of 0.2% of annual GDP and a declining public debt of 45% of GDP in the first half of 2025. The unemployment rate also continued to decrease, averaging 8.8% by mid-2025.