Construction has become one of the main drivers of Serbia’s economic expansion in 2026, supported by property development and public investment, with activity expected to remain strong through the autumn and the build-out for Expo 2027.
The value of completed construction work increased by around 9% year on year in real terms in the second quarter, while growth at current prices exceeded 20%. The sector was therefore among the strongest contributors to Serbia’s 3.8% Q2 GDP growth.
Building activity outpaces civil engineering
The national construction figures mask significant differences within the sector. Real construction work on buildings increased by more than 30%, while activity on civil-engineering structures declined. Belgrade recorded particularly strong growth, whereas activity in other parts of Serbia was considerably weaker.
Residential and commercial development, Expo 2027-related construction and major Belgrade projects are providing substantial support. By contrast, the timing of individual road, rail and utility projects is producing greater variations in activity across other regions. Forward indicators remain positive. Serbia issued 2,673 building permits in June, an 11.3% year-on-year increase. The permits covered plans for 3,873 dwellings. Within civil-engineering permits, pipelines, communications infrastructure and electricity lines represented the largest category.
Public investment expands the project pipeline
Fiscal policy is providing additional support for construction activity. Under the revised 2026 state budget, general-government capital expenditure is planned at approximately RSD 780 billion, equivalent to around 7% of GDP. The investment programme includes Expo 2027, the Belgrade metro, national road corridors, railway infrastructure, energy networks and other major transport and urban projects.
Construction activity also generates demand across a broad group of industries and services, including cement, concrete, aggregates, steel products, electrical equipment, transformers, cables, engineering services, logistics, machinery, project management and bank financing.
Industrial suppliers benefit from construction demand
Recent industrial data show developments consistent with some of these spillovers. Production of non-metallic mineral products increased in July, while electrical-equipment and machinery production also recorded substantial growth. The demand base for electrical equipment and machinery, however, extends beyond construction. The sector is simultaneously becoming an important source of labour-market pressure. Serbia’s overall labour-force participation is declining, while major projects require engineers, skilled construction workers, electricians, machine operators and specialist subcontractors at the same time.
Rising costs put pressure on project margins
Higher labour demand could push wages and contractor prices above underlying productivity growth as the Expo 2027 deadline approaches. Material costs represent another pressure point. Industrial producer prices were 9.0% higher year on year in August, while producer prices for energy increased 19.3%. Construction companies operating under fixed-price or weakly indexed contracts could therefore face margin compression even as nominal construction activity remains strong.
Financing conditions are more supportive than the 5.75% National Bank of Serbia policy rate alone indicates. Corporate borrowing rates have fallen from earlier peaks, while housing finance has also become cheaper, supporting both developers and property buyers. Construction is expected to remain ahead of the broader industrial economy during the autumn and continue linking government investment with private-sector demand. As Serbia approaches Expo 2027, the pace of construction will increasingly depend on access to labour, materials, permits, engineering resources, financing and project-execution capacity alongside the availability of projects.
