Serbia’s industrial sector entered 2026 with limited momentum, widening the gap between headline economic growth and the performance of the country’s productive base. Total industrial production increased only 0.6% year on year in January-May, even as real GDP expanded 3.2% in the first quarter.
Manufacturing remained the only major industrial segment in positive territory, growing 1.6%. Mining contracted 0.5%, while electricity, gas, steam and air-conditioning supply fell 3.2%. The figures point to an economy supported by services, consumption, credit and public investment rather than a synchronised industrial expansion.
The comparison with previous years makes the slowdown more visible. Total industry grew 2% in January-May 2024and 2.5% in the corresponding period of 2025. Manufacturing expanded 2.7% in 2024 and 4.2% in 2025, before slowing to 1.6% this year. Mining moved from exceptional growth of 9.9% in 2024 to 2% in 2025 and then into contraction.
Energy supply has remained the most persistent drag. Output in electricity, gas, steam and air-conditioning fell 4.3% in January-May 2024, 4.7% in 2025 and another 3.2% in 2026. Three consecutive comparable declines have created a structural weakness rather than a temporary statistical fluctuation.
Serbia’s energy position has direct implications for industrial margins. Manufacturers require reliable electricity and fuel supplies, predictable connection terms and a stable regulatory framework. Falling domestic energy output increases exposure to imports and regional market prices, particularly during periods of low hydrology, weaker coal availability or transmission congestion.
The unresolved position of Naftna Industrija Srbije is the most significant single industrial risk. NIS links the Pančevo refinery, domestic fuel distribution, exploration and production, petrochemicals, tax receipts and the wider logistics chain. Any prolonged production interruption would reduce industrial output, increase petroleum imports and expose transport, agriculture and manufacturing to higher working-capital requirements.
A durable ownership and operating solution would produce benefits beyond NIS itself. Stable refinery activity would support suppliers, hauliers, storage operators, engineering contractors and industrial consumers. It would also reduce one of the main sources of uncertainty considered by international investors and rating agencies.
Mining’s 0.5% contraction deserves similar attention. Serbia has built a growing metals and mining profile around copper, gold and associated processing in eastern Serbia, while coal remains important to the electricity system. A weaker aggregate result can therefore reflect very different developments across metallic mining, coal extraction and quarrying.
The distinction matters because mining projects have different investment and export characteristics. Copper and gold production can support merchandise exports and foreign-exchange inflows, while lower coal extraction can weaken electricity generation and increase fuel or power imports. Aggregate mining data alone cannot identify which side is driving the decline, but the simultaneous fall in energy supply suggests a need to examine domestic fuel availability closely.
Manufacturing’s 1.6% growth is more encouraging but remains too modest to anchor a 3% national growth rate without support from other sectors. The industry also faces weak European demand. The European Union is expected to grow only 1.1% in 2026, while Germany is projected at 0.8%. Serbian suppliers linked to automotive, electrical equipment, rubber, plastics, metals and machinery therefore operate in a low-growth export environment.
Merchandise exports nevertheless rose 7.7% to €14.7 billion in the first five months. The stronger export result may reflect improvements in selected plants, product prices and individual supply chains rather than broad volume growth across manufacturing. It also shows that Serbia’s industrial exporters can gain market share even when aggregate production expands slowly.
Regional markets remain particularly important. Serbia recorded its largest trade surpluses with Montenegro, Bosnia and Herzegovina and North Macedonia, supported by pharmaceuticals, electrical conductors, vehicles, food products and other industrial goods. Surpluses were also achieved with Germany, the Czech Republic and Slovakia, demonstrating the depth of Serbia’s integration into Central European manufacturing chains.
The largest merchandise deficit remained with China, driven by consumer products, electronics and industrial equipment. This deficit is partly structural: Chinese machinery, components and capital goods support Serbian construction, infrastructure, energy and manufacturing projects. The long-term value depends on whether imported equipment raises domestic productivity and creates exportable output.
Investment financing remains available but expensive. The NBS reference rate has stood at 5.75% since September 2024, while corporate lending increased 12.1% in April 2026. Investment loans rose 15.3%, showing that companies are still financing expansion despite restrictive monetary conditions.
Higher credit growth cannot fully substitute for foreign capital and retained earnings. Net FDI amounted to only €357 million in January-April, far below the levels recorded before the 2025 slowdown. Manufacturers planning large plants, processing facilities or energy-intensive investments continue to face higher equity requirements, more conservative debt structures and stronger lender scrutiny of energy and offtake risks.
Industrial decarbonisation adds another capital requirement. Serbian exporters of metals, fertilisers, cement, chemicals and other carbon-exposed products must address EU carbon costs, product-level emissions data and electricity sourcing. The relevant investment programme extends beyond renewable procurement to process efficiency, metering, mass-and-energy balances, heat recovery and auditable production data.
The contraction in domestic energy supply makes this more difficult. A factory cannot rely on lower-carbon electricity claims without robust metering, contractual evidence and a credible generation source. Renewable PPAs can provide part of the solution, but grid connection, hourly production shape and balancing exposure determine the actual industrial value.
Wind and solar must also be treated differently. Solar can reduce daytime procurement costs but may deepen midday price discounts and leave evening consumption uncovered. Wind generally has a higher capacity factor and a different hourly profile, offering greater value during overnight and shoulder periods. Industrial offtakers need portfolios shaped around consumption rather than a single annual renewable volume.
Public infrastructure investment may support industrial demand through orders for steel, cement, electrical equipment, engineering and transport services. The fiscal deficit reached €907.3 million in January-May, partly because of higher capital expenditure. The industrial benefit will depend on domestic procurement content and the extent to which projects build lasting logistics, energy and digital capacity.
Serbia’s industrial market is therefore not in recession, but it lacks breadth. Manufacturing is expanding slowly, mining has moved into contraction and energy output remains a multi-year drag. A resolution of the NIS issue, stronger electricity production and a recovery in European demand would allow industry to contribute more fully to the projected acceleration of GDP growth in 2027.
