Raiffeisen Bank has increased its forecast for Serbia’s 2026 economic growth to 2.8%, up from its previous projection of 2.4%, citing stronger first-quarter economic performance, improved agricultural conditions and continued support from household consumption and government expenditure. At the same time, the bank expects consumer-price inflation to reach 5.7% by the end of the year, compared with its earlier forecast of 6.1%, despite annual inflation easing to 2.7% in June.
The revised outlook reflects an economy supported by domestic demand while facing continued inflationary pressures linked to energy markets, regulated prices and uncertainty surrounding NIS. Household spending, remittances and public-sector expenditure remain key drivers of activity as industrial productivity recovery remains uneven.
Domestic Demand Supports Economic Expansion
Annual inflation declined from 3.5% in May to 2.7% in June, while prices for food and non-alcoholic beverages fell 0.6% month-on-month. Improved fruit and vegetable harvests helped ease pressure on household budgets, and transport-price growth moderated following earlier increases in energy costs.
Despite the recent slowdown, Raiffeisen Bank expects inflation to accelerate during the remainder of the year because of anticipated increases in oil prices, electricity tariffs, heating costs and other regulated prices, together with base effects. Serbia has temporarily reduced fuel excise duties to moderate retail fuel prices, although the measure is expected to limit rather than eliminate inflationary pressures.
Fuel supply has become an additional source of uncertainty after exceptionally low water levels on the Danube reduced barge transport capacity, cutting Serbia’s fuel imports during July to a fraction of planned volumes. Alternative road and rail transport routes involve higher costs, while the Pančevo refinery continues to supply approximately 80% of domestic fuel demand.
NIS Ownership Uncertainty Adds Market Risks
The ownership structure of NIS, which remains under Russian control, continues to present geopolitical and market risks because the company operates under U.S. sanctions waivers that require repeated extensions. A transfer of the Russian shareholding to MOL or another acceptable buyer could reduce sanctions-related risks, although any transaction would depend on financing arrangements, regulatory approvals and political negotiations. A delayed resolution could affect fuel supplies, exchange-rate stability, government intervention and inflation expectations simultaneously.
The 2.8% growth forecast assumes these risks remain contained. Household consumption continues to benefit from strong wage growth and remittances from the Serbian diaspora. During the first five months of 2026, average net earnings increased 11.3% in nominal terms and 8.2% in real terms compared with the same period of the previous year, supporting consumer demand.
Public Investment Continues to Drive Activity
Government expenditure remains another major contributor to economic growth through construction and procurement linked to EXPO 2027, transport infrastructure and energy investment projects. These activities support construction output, employment and supplier revenues at a time when private-sector investment remains less certain.
The long-term economic impact of infrastructure spending depends on whether projects improve logistics efficiency, expand productive capacity and stimulate private investment. Projects focused primarily on event-related facilities or accelerated procurement schedules may increase economic activity during construction while generating greater demand for imported materials, equipment and labor, contributing to a wider trade deficit.
Serbia continues to benefit from public debt levels below those of many European economies and substantial foreign-exchange reserves. However, repeated policy interventions—including energy subsidies, temporary fuel excise reductions, household transfers and financial support for state-owned enterprises—continue to use fiscal resources. While individual measures may appear manageable, their cumulative impact becomes more significant when economic growth remains below 3% and financing costs stay elevated.
Manufacturing Recovery Remains Uneven
Serbia’s industrial performance continues to present mixed results. Higher vehicle exports from the Stellantis manufacturing plant in Kragujevac have strengthened trade performance, while expanding copper and gold production in eastern Serbia continues to support export revenues. Electronics manufacturing is also expanding in Niš.
These gains coincide with subdued demand across the eurozone and continuing uncertainty within European automotive and industrial supply chains. Germany and Italy remain key export destinations for Serbian manufacturers, and weaker growth in those markets affects demand for machinery, industrial components, metals and consumer goods.
Domestic consumption alone cannot permanently offset weaker industrial exports, as consumption-led growth also increases imports while export-oriented manufacturing generates the foreign exchange required to finance them. Agricultural production has contributed positively by increasing output, reducing food-price pressures and potentially supporting rural incomes and exports. However, the sector remains exposed to drought, animal disease and fragmented production structures. The spread of African swine fever illustrates how gains in one agricultural segment can be offset by losses elsewhere.
Monetary Policy Faces Competing Pressures
The National Bank of Serbia must balance slowing current inflation with expectations of stronger price growth later in the year. Although inflation currently remains within the central bank’s target tolerance range, expectations of year-end acceleration argue for caution in monetary policy. Lowering interest rates too quickly could stimulate additional credit growth and consumption as energy and regulated prices rise. Maintaining restrictive monetary policy for an extended period would increase financing costs for businesses and constrain investment.
Exchange-rate policy remains another important element of macroeconomic management. Stability of the Serbian dinar against the euro limits imported inflation and supports households and companies with euro-denominated liabilities. At the same time, exchange-rate stability can reduce export competitiveness when domestic wage growth outpaces productivity. The National Bank of Serbia has historically supported exchange-rate stability through market intervention backed by foreign-exchange reserves.
Corporate and Banking Outlook
For the banking sector, the improved growth outlook provides support for retail lending as rising real wages strengthen consumer demand, while public investment creates additional opportunities in construction finance, guarantees and corporate lending. At the same time, inflation and uncertainty in energy markets continue to complicate credit assessment. Businesses with limited operating margins, high electricity consumption or significant dependence on imported inputs may experience renewed financial pressure even if overall economic growth strengthens.
Corporate performance is expected to vary according to pricing power. Export-oriented manufacturers with euro-denominated long-term contracts, diversified customer bases and efficient energy consumption are positioned differently from businesses focused primarily on domestic consumer demand, which remain exposed to rising payroll, rental and utility costs. Companies operating in state-regulated industries also face uncertainty over the timing of tariff adjustments. Although projected economic growth of 2.8% would represent an improvement on 2025, it remains below the level required for faster convergence with the European Union. Achieving sustained growth above 4% would require stronger productivity, higher domestic value added, improved competitiveness among state-owned enterprises and increased private investment.
The gap between the 2.7% inflation recorded in June and the projected 5.7% year-end rate reflects expectations that favorable agricultural output, wage growth exceeding inflation and stronger-than-expected economic activity will face increasing pressure from energy costs, regulated tariffs and weaker external demand as 2026 progresses.
