Higher energy costs and the withdrawal of administrative price controls have lifted inflation in Serbia since March, adding pressure to households, companies, trade balances and the broader macroeconomic outlook. The latest Quarterly Monitor assessment described the economy as resilient but uneven. Serbia’s GDP expanded by 3.2% year on year in the first quarter of 2026, placing it among the faster-growing European economies during the period. Agriculture and services supported growth, while industrial output stagnated, construction declined and investment did not provide a stronger contribution.
Private consumption, public consumption and exports supported first-quarter demand. Investment remained stagnant, limiting the contribution of capital formation to economic expansion.
Price Controls and Domestic Cost Pressures
The government used lower excise duties, commodity-reserve interventions and retail-price controls on selected energy products to reduce the immediate effect of global energy prices on consumers and businesses. The removal or easing of those measures has contributed to the rise in inflation since March.
Inflationary pressures now include energy costs, wages, services, regulated prices, logistics expenses and business operating costs. Core inflation and service prices have also increased.
The National Bank of Serbia projects annual inflation of up to around 5%, subject to the absence of major disruptions in global markets and significant pre-election public spending.
Fiscal Policy and Public Expenditure
The Quarterly Monitor identified issues related to the grey economy, spending prioritisation, corruption and the efficiency of public expenditure. Fiscal policy does not currently appear to threaten macroeconomic stability, according to the assessment. Public spending can be directed toward infrastructure, energy-system stability and targeted support, while expenditure also affects aggregate demand. Serbia’s public debt ratio remains relatively low compared with many European economies, although interest costs are high.
Public investment includes infrastructure and EXPO-related activity. Construction may receive support from EXPO-linked projects and other public infrastructure spending.
Foreign Capital Outflow Reaches €866 Million
Serbia recorded a €866 million foreign-capital outflow in the first quarter of 2026. The movement reflected a decline of around 40% in foreign direct investment, trade-credit outflows and withdrawals of portfolio investment.
Foreign direct investment has contributed to manufacturing, exports, employment, infrastructure-linked development and financing of Serbia’s external balance. Domestic investment is relevant to automation, industrial equipment, logistics, energy efficiency, export certification and industrial expansion.
Energy prices began affecting Serbia’s trade and current-account balances from April. Oil, gas, electricity and fuel costs influence import expenditure, industrial margins, transport costs, household purchasing power and external financing requirements.
Monetary Policy and Exchange-Rate Management
The National Bank of Serbia has maintained its benchmark interest rate at 5.75%. The central bank has also sold foreign exchange to limit weakening of the dinar.
Exchange-rate stability affects euro-indexed obligations held by companies, households and banks, as well as imported inflation. Capital inflows, portfolio investment movements, foreign-exchange reserves and energy-import costs affect exchange-rate management.
Higher inflation and interest rates influence investment decisions, borrowing conditions and bank lending. Companies can postpone expansion plans when operating costs and financing conditions are uncertain.
Labour Costs and Export Competitiveness
Employment has continued to deteriorate mildly, unemployment has stagnated and real wages have increased strongly in both the public and private sectors. Labour costs measured in euros have also risen.
Serbia’s manufacturing investment model has included lower costs than many EU economies, proximity to European markets and access to regional supply chains. Wage growth, energy costs and service costs affect production costs for exporters.
Industrial output stagnated in the first quarter, while construction declined. Industrial activity could recover partly through Stellantis, while automotive production remains linked to external demand and supply-chain conditions.
Energy Requirements for EU-Facing Industry
Energy costs, fuel use, electricity sourcing and embedded emissions affect industrial producers serving EU markets. Carbon, energy and compliance requirements are relevant to exporters in metals, cement, chemicals, fertilisers, aluminium processing, food processing and construction materials.
For these industries, energy costs affect margins, contract pricing, investment decisions and buyer requirements. Grid investment, energy resilience, stable electricity supply and energy documentation are linked to industrial competitiveness.
The Quarterly Monitor’s assessment placed Serbia’s 2026 growth potential near 3%, with inflation, investment, capital inflows, energy prices, public expenditure, productivity and industrial competitiveness remaining central components of the macroeconomic environment.
