The International Monetary Fund (IMF) has upgraded its economic growth forecasts for Serbia to 3.3% in 2026 and 4.0% in 2027, although inflation, energy prices and financing pressures continue to challenge businesses and investors.
The revised projections, published in the IMF’s World Economic Outlook, are 0.5 percentage points higher for both years than the Fund’s previous estimates. Growth is expected to benefit from household consumption, infrastructure construction and manufacturing investment. Serbian consumer prices increased 4.1% year-on-year in September, compared with 2.2% in August. The IMF expects average annual inflation of 3.1% in 2026, accelerating to 4.2% in 2027.
Construction and Manufacturing Support Growth
Serbia’s economy expanded by 3.8% year-on-year in the second quarter. Construction gross value added increased 9.1%, while wholesale and retail trade, transportation, storage, accommodation and food services recorded combined growth of 4.4%. Professional, technical and administrative services grew 5.8%.
Retail trade turnover rose 7.2% in real terms during the first eight months, supported by household demand. Infrastructure projects, preparations for EXPO 2027 and manufacturing capacity expansions also contributed to economic activity.
Industrial performance remained uneven, with industrial production declining 0.5% year-on-year in August. Energy-intensive manufacturers and electricity producers continue to face operating-cost pressures. The longer-term benefits of infrastructure spending will depend on whether projects improve logistics, reduce business costs and encourage private investment.
Inflation Keeps Borrowing Costs Under Pressure
Consumer prices increased by just 0.2% between August and September, indicating that the rise in annual inflation partly reflected a low comparison base following government restrictions on retail margins in the previous year. Nevertheless, Serbia’s dependence on imported crude oil, petroleum products and natural gas leaves businesses exposed to international energy prices.
The National Bank of Serbia (NBS) maintained its benchmark interest rate at 5.75%. Its inflation target remains 3%, with a tolerance band of 1.5 percentage points in either direction, placing September inflation within the target range but close to its upper limit.
Persistent inflation could limit the scope for lower borrowing costs, affecting companies financing equipment purchases, construction and working capital.
Banks Assess Industrial and Carbon-Related Risks
Stronger economic activity could increase demand for corporate loans, leasing and trade finance, particularly in manufacturing, infrastructure and logistics. However, banks must continue assessing exporters’ exposure to European demand, customer concentration, imported raw-material costs and currency fluctuations.
The EU Carbon Border Adjustment Mechanism (CBAM) adds further considerations for exporters in steel, aluminium, cement and fertilisers. Emissions accounting, verification requirements and potential carbon-related costs may influence investment needs and projected cash flows, depending on production technology and emissions intensity.
External Financing Remains Important
The IMF projects Serbia’s current-account deficit at 4.6% of GDP in 2026, narrowing to 3.5% in 2027, compared with 4.9% in 2025. Despite the expected improvement, imports of machinery, industrial equipment, construction materials and energy will continue to create external financing needs. Foreign direct investment, external borrowing and other capital inflows will remain important to Serbia’s financial position.
Banks must also assess foreign-currency liquidity and corporate refinancing risks, particularly among companies borrowing in euros while generating most of their revenue in dinars.
Infrastructure Investment Must Deliver Productivity Gains
Serbia’s investment programme covers transport, energy, public infrastructure and industrial development. Electricity transmission projects can ease grid constraints, railway modernisation can improve freight capacity, and industrial infrastructure can support exports.
Projects with limited commercial utilisation or high maintenance costs may create fiscal pressures without delivering comparable productivity improvements. The IMF has highlighted the importance of fiscal discipline, effective public investment management and oversight of state-owned enterprises. For investors, the key consideration is whether public spending generates additional private investment and stronger industrial competitiveness.
2027 Growth Outlook Remains Positive
The IMF’s 4.0% growth forecast for 2027 reflects potential contributions from manufacturing expansion, infrastructure development, household demand and tourism associated with EXPO 2027.
Projected inflation of 4.2% could continue to weigh on purchasing power and operating costs. Serbia’s investment prospects in manufacturing, logistics, renewable energy and digital services will depend on reliable energy supplies, skilled labour, predictable regulation and sustainable financing costs. The challenge remains converting stronger headline growth into higher productivity, competitive exports and sustainable private-sector investment.
