EY Serbia Macroeconomic and Banking Sector Pulse

EY Serbia has released new editions of its flagship reports. One report examines macroeconomic trends and risks both within Serbia and internationally, while the other analyzes the recent performance of Serbia's banking sector.

EY Serbia prepared a new pair of our flagship reports, delving into macroeconomic and into financial and business perspectives of recent economic trends in Serbia: while our Macroeconomic Pulse reports on the broader economic context and trends in Serbia, providing our views on the economic outlook, our Banking sector Pulse examines how Serbia's banks have navigated the recent economic landscape.

The Macroeconomic Pulse reports that Serbia’s economy managed to reach relatively strong growth in 2024. However, growth has been slowing down recently, amid intensifying uncertainties in Serbia and abroad. Mounting military, trade, political uncertainties in Serbia and abroad have seemingly led to renewed inflationary pressures in late 2024 and early 2025, as well as to a decline in business and consumer confidence across the world. In such landscape, Serbia’s growth has been cooling down recently: from the relatively strong 4.5% Y/Y in first half of 2024, it decelerated to 3.3% Y/Y in second half of 2024, while the early 2025 data suggest a further slowdown taking place. During 2024 and early 2025, Serbia’s GDP growth has largely been consumption-driven, as households’ spending surges amid tight labor market and soaring wages. But investments – a key driver in recent years – are nearing stagnation after years of strong and sustained growth; while exports stall amid poor demand in Serbia’s key partners, but also in context of an erosion of Serbia’s export competitiveness – i.e. soaring labor, energy and financing costs, coupled with a real RSD appreciation.

Meanwhile, Serbia’s banking sector fares very well amid this economic landscape, achieving record-high profits, amid the still relatively high-interest rate environment, as reported by Banking sector pulse. Serbia’s banks reached as high as EUR 1.5 b in pre-tax profit in 2024, by far the highest since the sector was reformed in the early 2000s. The outstanding profits are largely shaped by the still prevailing high-interest rate environment and high-interest rate margins. Indeed, most central banks, including the NBS, only slightly cut interest rates during 2024, after hiking them to relatively high levels, responding to a global surge in inflation in 2022 and 2023. Structure of Serbian banks’ balance sheet also evolved within the high-interest rate context: deposit stock and liquidity soared in the recent period, while lending rose only modestly, leaving much space to banks to increase exposure to T-bills and REPOs.

Moving forward, we anticipate that Serbia’s growth would slightly slow down, and GDP to expand by 3.2% at level of 2025. This is a 0.6 percentage point downward revision to our previous forecast, as a mix of various risks recently materialized. Among others, newly elected US administration introduced a range of protectionist measures in early 2025, including a relatively high level of tariffs on imports, adding to the already elevated uncertainties induced by ongoing military, trade and political conflicts. This set of factors heats up inflationary pressures, affects growth in Serbia’s key trading partners, and prevents Serbia’s and international policy makers to tangibly reduce interest rates. It also weighs on export demand for Serbian goods and investment inflows to Serbia, adding to adversity. However, we expect household consumption to keep pushing up growth in Serbia, while the government’s ambitious investment plans, ahead of EXPO 2027, could provide some support to growth.