Serbia is inching closer to achieving full investment-grade status after receiving its first investment-grade credit rating from Standard & Poor’s (S&P) last October. However, recent political instability has stymied further upgrades by other major international rating agencies. 

Over the past decade, Serbia’s economic transformation has positioned it closer than ever to achieving this goal. National Bank of Serbia (NBS) Governor Jorgovanka Tabakovic, who secured her third term last year, has been a vocal proponent of Serbia's pursuit of an investment-grade rating, calling it "just a matter of time". 

The country has made significant strides in controlling inflation, which peaked at 12.2% at the end of 2012. From 2009 to 2013, Serbia’s inflation rate was a staggering 4.9 percentage points higher than that of its Central European counterparts. However, by 2013, Serbia’s inflation rate aligned with regional peers, a trend that has continued since. 

In addition, the average consumer's purchasing power has grown, with wages now covering 93.5% of the average consumer basket as of the first five months of 2024, up from 65.9% in 2013. The Serbian dinar has remained stable, strengthening by 1.3% against the euro over the past 12 years.

Serbia’s gold reserves have also surged, tripling in quantity and growing five and a half times in value since August 2012. Gold now makes up 12% of the country’s foreign exchange reserves, up from 6%. Savings have risen dramatically, with dinar savings growing nine-fold since 2012, reaching nearly RSD165bn.

The country's banking sector has also seen improvements, with the share of non-performing loans falling from around 20% in 2012 to below 3% in 2024. Exports of goods and services have nearly quadrupled, rising from €11.5bn in 2012 to €41bn in 2023, while foreign direct investment (FDI) inflows totalled €34bn in that period, reaching a record €5.1bn in 2024.

Serbia’s first investment-grade rating, granted by S&P, was hailed by President Aleksandar Vucic as a "significant moment" for the country. "After almost a decade of hard work, Serbia has reached investment-grade status for the first time in history, signalling our stability and attractiveness as a destination for global investors," Vucic said in October.

Finance Minister Sinisa Mali also lauded the rating, calling it a confirmation of Serbia’s robust macroeconomic policies. "This shows that we are on a successful path of continuous economic growth and macroeconomic stability," he stated at the time.

S&P’s decision reflected a decade of consistent economic reforms that have accelerated Serbia's economic growth, reduced inflation and improved the country’s fiscal situation. Serbia’s real GDP grew by an estimated 3.9% in 2024 and Fitch projects it to rise to 4.2% in 2025, buoyed by strong domestic demand and major infrastructure projects, including preparations for Expo 2027.

However, Serbia's aspirations to join the investment-grade club have faced setbacks due to recent political instability. Raiffeisen analysts caution that Serbia will have to be patient before it becomes a "full" member of the investment-grade club. This, according to the bank's research, would require at least two of the three major rating agencies to upgrade the country’s rating.

While S&P’s upgrade was a milestone, Fitch has since withheld a confirmation of Serbia’s investment-grade status. Earlier this month, Fitch maintained Serbia’s BB+ rating, a notch below investment grade, citing concerns over governance indicators, particularly the country’s political stability. The resignation of Serbia’s prime minister and the collapse of the government likely dissuaded Fitch from following S&P’s lead.

Domestic instability has intensified since November 1, 2024, when an infrastructure collapse at Novi Sad railway station killed 15 people and injured two more. Months of mass protests, strikes and blockades culminated in the resignation of Prime Minister Milos Vucevic in January, as well as other top government officials, raising the possibility of new elections in May. 

Raiffeisen analysts believe that the current political crisis is “no cause for despair”, suggesting that the crisis will resolve itself without altering the course of Serbia’s economic policy. Likewise, Fitch said in its latest report that while political uncertainty could delay key reforms and infrastructure projects, it does not expect a drastic shift in Serbia’s policy mix.

Looking ahead, Serbia’s long-term investment outlook remains optimistic. The government’s “Leap into the Future - Serbia Expo 2027” initiative is expected to spur a major public and private investment boom. The €18bn investment plan, focused on infrastructure projects linked to Expo 2027, is expected to sustain the country's economic growth and boost productivity over the medium term, regardless of how Serbia's current political drama unfolds.