Serbia’s manufacturing sector ended 2025 in positive territory, but the headline growth rate concealed a much more uneven internal structure. According to the February 2026 issue of MAT – Macroeconomic Analyses and Trends, total manufacturing output rose 1.1% in 2025, even as overall industrial production increased only 0.9% and December manufacturing output fell 8.3% year-on-year. The significance of that result lies not in the modest annual increase itself, but in how narrowly it was generated. Out of 29 industrial branches, only 12 recorded growth over the full year, meaning the positive result came from a limited share of Serbia’s productive base rather than from broad-based industrial expansion.
That is the central message of the manufacturing data. Serbia did not experience a generalized collapse of industry in 2025, but it also did not achieve a balanced industrial recovery. Instead, the manufacturing sector was held together by a small number of strong performers, above all motor vehicles and rubber-plastics production, while several large and strategically important branches either stagnated or fell. The year therefore revealed both the resilience and the fragility of Serbia’s industrial model. It showed that manufacturing can still grow in a weak European environment, but also that such growth is increasingly concentrated and therefore more vulnerable to external shocks, geopolitical disruptions, and branch-specific operational problems.
The broader macroeconomic backdrop helps explain why that concentration matters so much. The MAT report states that Serbia’s industrial slowdown reflected global economic uncertainty, geopolitical risk, and weak European demand, while the change in year-end dynamics was decisively shaped by disruptions at the Pančevo refinery. At the same time, the report points out that the automotive sector emerged as the key generator of higher manufacturing output and export value in 2025. That juxtaposition captures the structure of the year: one shock-heavy, politically exposed branch pulled manufacturing down, while one export-oriented branch linked to European automotive demand pulled it up.
The strongest positive story inside the manufacturing sector was clearly the branch production of motor vehicles, trailers and semi-trailers. The launch of the electric Fiat Grande Panda in Kragujevac at the beginning of 2025 changed the industrial profile of the year. MAT notes that average monthly growth in vehicle production during the first ten months was around 4%, while the achieved level of production by the end of 2025 was about 60% higher than the 2024 average. This branch alone contributed 4 percentage points to manufacturing growth in December, and cumulatively added 1.8 percentage points to the sector’s annual growth of 1.1%. In practical terms, automotive production did not simply support manufacturing growth. It more than explains it.
That level of concentration should not be overlooked. When one branch contributes 1.8 percentage points to a sector that grows only 1.1%, it means that the rest of manufacturing, taken together, was either weak, flat, or negative enough to absorb part of the automotive gain. Serbia’s manufacturing result in 2025 was therefore less a story of generalized improvement and more a story of sectoral substitution, where automotive expansion offset a much wider set of pressures elsewhere.
The second major support pillar was rubber and plastics. This branch recorded year-on-year growth of 7.5% in December, contributing 0.62 percentage points to monthly manufacturing growth. Across the full year, production in rubber and plastics increased 16.6%, adding 1.33 percentage points to annual manufacturing growth. Like automotive production, rubber and plastics outperformed decisively and acted as a stabilizer for the broader industrial complex. Yet here too there was an early warning embedded in the data. The MAT report notes that the branch’s momentum may already have begun to slow in December, partly due to external geopolitical factors, specifically the U.S. ban introduced in mid-December on imports of tires from the Zrenjanin-based Linglong factory. Even one of the year’s strongest manufacturing branches therefore enters 2026 with an external regulatory risk attached to it.
If automotive production and rubber-plastics were the leading upward forces, the food industry was the critical large branch whose weakness prevented manufacturing growth from becoming broader and stronger. MAT describes food production as the absolute giant of Serbian manufacturing, accounting for exactly 19.8% of the sector. That means its performance has a direct effect on the condition of manufacturing as a whole. Yet food processing contracted by around 1.5% in 2025. After a brief rebound of 2.1% in November, production fell again by 3.2% in December, while the longer-term trend had already been on a downward path since the middle of 2024. By the end of 2025, the report says, the level of food production was comparable to that of August 2023.
The internal composition of that weakness is revealing. The sharpest December contraction came from fruit and vegetable processing, where output declined by almost one-third, or 31.9% year-on-year. Additional negative pressure came from oils and fats, down 11.8%, while “other food products,” after a strong 13.8% increase in November, turned negative again at -3.1% in December. These figures suggest that food manufacturing in Serbia is not only large, but increasingly volatile. That volatility matters because a manufacturing structure in which the largest branch is oscillating while growth depends on automotive and plastics is inherently less stable than one in which several large branches move upward together.
The largest outright negative force in manufacturing was the branch production of coke and petroleum products. In December 2025, output in this branch fell 94.3% year-on-year, with a negative contribution of -8.85 percentage points to manufacturing. MAT states explicitly that this branch, viewed in isolation, can explain the entire fall of manufacturing output in December. The report further notes that from May to September 2025 output in this branch had already been down by around ten percent year-on-year, before the decline deepened to -30.3% in October, roughly -44% in November, and then near standstill in December, when the output index relative to the 2024 average fell to just 6.5.
This matters not only because the refinery branch is strategically important, but because it demonstrates how Serbia’s manufacturing result in 2025 was shaped by a collision between industrial performance and geopolitics. The MAT report characterizes the performance of this branch as increasingly determined by political rather than economic considerations. It calls the NIS situation the largest short-term risk to domestic industry and links the deterioration to sanctions risk surrounding the Russian ownership structure and the interruption of supply through JANAF. The manufacturing sector therefore carried, inside one of its own largest negative branches, a vulnerability that was external to pure industrial economics.
The pattern of branch-level gains and losses also shows that Serbia’s manufacturing base in 2025 was polarized between a few strong growth clusters and a wider set of underperformers. The industrial production table in MAT indicates that over the full year several branches remained below the 2024 average. These included textiles at 98.7, clothing at 80.0, leather goods at 89.6, chemicals at 99.7, pharmaceuticals at 96.9, electrical equipment at 99.4, machinery and equipment n.e.c. at 89.0, and other transport equipment at 96.3 on an index basis where the 2024 average equals 100. By contrast, stronger full-year performers included wood processing at 101.8, paper at 100.3, printing at 110.2, rubber and plastics at 116.6, basic metals at 103.3, fabricated metal products at 104.6, motor vehicles at 135.3, and other manufacturing at 108.3.
This branch map has an important implication. Serbia’s manufacturing sector is not simply “industrial” in a generic sense. It is increasingly split between tradable, medium-complexity industrial branches that serve export chains and a set of weaker, more traditional branches that have either lost dynamism or face structural pressure. Clothing, leather, and low-value-added manufacturing activities continued to lag, while automotive components, fabricated metals, and rubber-plastics performed much better. That is consistent with a wider transformation in Serbia’s industrial base from labor-intensive light manufacturing toward medium-technology supplier roles integrated with European industry.
The MAT report confirms this through its technological breakdown. All of the positive contribution to manufacturing growth in 2025 came from branches of medium technological complexity. The combined contribution of medium-high and medium-low technology groups amounted to 1.8 percentage points. By contrast, high-technology production fell 2.5%, with a negative contribution of 0.2 percentage points, while low-technology branches declined 2.1%, subtracting 0.8 percentage points. Serbia’s manufacturing resilience in 2025 therefore did not come from a leap into a high-tech industrial model. It came from stronger performance in medium-complexity production lines, many of them connected to automotive supply chains and industrial materials.
A similar conclusion emerges from the end-use structure of industrial production. In 2025, growth was recorded in intermediate products excluding energy, up 5.7%, and in capital goods, up 7.7%. But energy production fell 9.5%, durable consumer goods fell 5.6%, and non-durable consumer goods fell 2.9%. MAT also notes that the only stable long-term growth trend was visible in capital goods production. This suggests that Serbia’s manufacturing system is becoming more dependent on investment goods, industrial inputs, and export-linked production rather than on broad-based consumer manufacturing. That shift can support exports, but it also makes the system more sensitive to investment cycles and external industrial demand.
The external environment described in the report reinforces that concern. In January 2026, manufacturing PMI stood at 49.5 in the EU, 49.1 in Germany, and 48.1 in Italy, all below the 50 threshold separating expansion from contraction. MAT goes further and argues that the eurozone’s industrial problem, especially in Germany, is structural rather than cyclical. For Serbia, that matters because the strongest branches in manufacturing are precisely those tied most closely to European supplier chains. If Serbia’s manufacturing gains are concentrated in branches whose demand depends on a weak German and Italian industrial cycle, then even successful domestic output growth may prove less durable than the annual numbers suggest.
This is why the 1.1% manufacturing growth rate should not be read as a simple sign of stability. It is more accurately a sign of survival under asymmetric conditions. Serbia’s manufacturing sector remained positive in a difficult year, which is itself notable given that many European economies did worse. But the route to that positive outcome was narrow. Automotive production and rubber-plastics carried the sector. Food underperformed. Oil refining collapsed. Several traditional low-technology branches stayed weak. High-tech production fell. The structure of the result points not to a mature, diversified manufacturing upswing, but to a selective, medium-technology recovery exposed to both geopolitics and EU industrial demand.
The strategic implication is straightforward. Serbia does not only need more manufacturing growth. It needs wider manufacturing participation in that growth. As long as a handful of branches generate most of the sector’s positive movement, any disruption to one of them can quickly alter the national industrial result. The experience of 2025 makes that point clearly. Manufacturing still grew, but only because a few branches were strong enough to absorb the damage caused by a severe refinery shock and weakness elsewhere. That is not an unsustainable model in the short run, but it is not a particularly resilient one either.
If 2026 brings normalization in petroleum refining and continued strength in vehicle production, manufacturing could perform better. But the more important question is whether Serbia can broaden its industrial base beyond the current concentration in a few medium-technology winners. Until that happens, the manufacturing story will remain one of selective strength rather than full-sector depth.
