The International Monetary Fund (IMF) has raised Serbia’s economic growth forecast to 3.3% in 2026 and 4% in 2027, supported by construction, domestic consumption and investment. However, rising inflation, energy costs and uneven industrial performance continue to pose challenges for businesses, lenders and infrastructure investors.
The revised projections, published in the IMF’s World Economic Outlook, represent increases of 0.5 percentage points against the Fund’s earlier forecasts for both years. The growth outlook has improved, but average inflation is projected at 3.1% in 2026 and 4.2% in 2027, potentially increasing pressure on corporate financing and operating costs.
Construction and domestic demand drive growth
Serbia’s GDP expanded 3.8% year-on-year in the second quarter, accelerating from 3.2% in the first quarter, according to the Statistical Office. Construction gross value added increased 9.1%, while trade, transportation, accommodation and food services grew 4.4%. Professional, scientific, technical and administrative services expanded 5.8%, and household consumption rose 4%.
Gross fixed capital formation increased 3.3%, while exports of goods and services grew 4.1%. Imports rose faster, by 5.2%, reflecting demand for equipment, machinery and construction materials.
Infrastructure development, including roads, railways, energy systems and EXPO 2027-related construction, remains an important source of economic activity. The long-term value of these investments depends on whether they improve productivity, reduce logistics costs and support private-sector production.
Industrial recovery remains uneven
Despite stronger GDP growth, industrial performance remains weak. Industrial production declined 0.5% year-on-year in August, while manufacturing output fell 1.8%. Mining production increased 6.7%, while total industrial production grew by only 0.1% across the first eight months. Automotive suppliers, electrical-equipment manufacturers, metals processors and chemical companies remain exposed to demand in Germany, Italy and other European markets.
New manufacturing facilities could expand Serbia’s production capacity, but their financial performance depends on customer contracts, equipment commissioning, workforce availability and competitive electricity prices. Low capacity utilisation and rising operating costs can weaken cash flow and investment returns.
Inflation keeps borrowing costs under pressure
Annual inflation accelerated to 4.1% in September, compared with 2.2% in August. However, monthly consumer-price growth was only 0.2%. The annual increase was partly influenced by comparison with an unusually low inflation reading in the previous year, when government restrictions on retail margins were in effect.
The National Bank of Serbia (NBS) maintained its benchmark interest rate at 5.75%, with the deposit facility rate at 4.5% and the lending facility rate at 7%.
Serbia’s inflation target remains 3%, within a tolerance range of 1.5% to 4.5%. Rising international energy prices and potential supply-chain disruptions remain concerns for monetary policy. Companies financing machinery, commercial property, logistics facilities and working capital could face prolonged borrowing-cost pressures. Euro-denominated loans may offer different financing conditions but expose businesses with dinar revenues to currency risk.
Banks face opportunities and differentiated credit risks
Improving economic activity could support demand for corporate lending, investment finance, leasing and trade-related banking services. Nevertheless, lenders must assess risks across individual sectors. Export-oriented manufacturers remain exposed to European demand and customer concentration, while construction companies face project delays, procurement changes and payment risks. Energy-intensive businesses must account for electricity prices, fuel costs and environmental compliance expenditure.
The EU Carbon Border Adjustment Mechanism (CBAM) may increase compliance costs for exporters of steel, aluminium, cement and fertilisers. Competitive electricity supplies, reliable emissions data and lower-emission production are becoming increasingly important to commercial competitiveness. Banks must determine whether borrowers can absorb higher operating expenses and maintain sufficient liquidity during weaker demand. Guarantees and development-finance participation can improve access to credit but do not eliminate project-level risks.
Energy imports weigh on external financing
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. Infrastructure and manufacturing investment generate demand for imported equipment, while energy purchases increase foreign-currency requirements.
Serbia’s gross foreign-exchange reserves declined by approximately €946 million in September, reaching €29.86 billion. The NBS attributed the reduction to government foreign-currency payments, interventions in the domestic foreign-exchange market, valuation effects and increased demand for foreign currency associated with energy imports. Reserves remained sufficient to cover approximately 6.7 months of imports, indicating substantial external liquidity. Nevertheless, energy expenditure and external financing requirements reinforce the importance of currency management and predictable funding for businesses and banks.
Infrastructure and manufacturing must deliver economic returns
Serbia continues to invest in transport infrastructure, electricity networks, public facilities and urban development. Railway modernisation can reduce freight costs, while electricity transmission and storage projects can improve system flexibility and renewable-energy integration. Projects with limited utilisation, insufficient operating revenues or substantial maintenance requirements can create long-term fiscal obligations.
State road operator Putevi Srbije reported a net loss of approximately €192 million in 2025, and the government has initiated preparations for financial restructuring. The company’s financial position highlights the importance of aligning infrastructure maintenance, operating responsibilities and revenue arrangements. Serbia’s manufacturing competitiveness will also depend on automation, energy efficiency, workforce development and reliable electricity supplies. Investors increasingly compare these factors alongside logistics, financing availability and regulatory requirements.
The IMF’s improved outlook provides a stronger basis for investment, but sustainable growth will depend on industrial productivity, controlled operating costs and the ability to convert infrastructure and manufacturing investment into export revenue and durable earnings.
