Serbia’s public finances remained on a relatively stable path in 2026, with public debt continuing to decline as a share of economic output, while government spending expanded faster than revenue. The general-government sector recorded a RSD 106.5 billion deficit during the first five months of 2026, reflecting increased expenditure on wages, pensions, services and capital investments.
Public revenue grew by 9.9% year-on-year during the period, supported mainly by higher social-security contributions, value-added tax collections and corporate-profit tax revenues. However, expenditure increased at a faster pace, rising by 12.5%.
Higher Spending Supports Incomes and Investment Program
The increase in government spending was partly driven by higher allocations for wages and pensions. Additional expenditure also went toward goods, services and capital projects. The spending structure reflects efforts to support household incomes while continuing implementation of a broad infrastructure investment program.
Serbia’s fiscal strategy targets a budget deficit equivalent to 3% of GDP in both 2026 and 2027, with the deficit expected to decline to 2.5% from 2028. The projected deficit levels depend on continued economic growth, controlled borrowing costs and the ability of capital investments to generate long-term economic returns.
Public Debt Continues Declining Relative to GDP
Public debt indicators continued improving relative to the size of Serbia’s economy. At the end of May, central-government debt stood at 43.7% of projected GDP, while the broader general-government debt ratio reached 44% of GDP. The central-government debt ratio was 0.7 percentage points lower than at the end of 2025.
Although debt levels remain on a declining trajectory, fiscal conditions will continue to depend on several factors, including economic growth, inflation, interest expenses, exchange-rate movements and future borrowing requirements.
Eurobond Issuance Extends Debt Maturity Profile
Serbia continued to actively manage its debt structure through international capital markets. In May, the country issued €3 billion in Eurobonds with maturities of five, ten and twelve years. The bonds carried coupon rates of 4.25%, 4.66% and 4.875%, respectively.
From the proceeds, €871 million was used for the early repayment of part of Eurobonds that were originally scheduled to mature in 2027. The transaction reduced near-term refinancing concentration and extended the average maturity profile of public debt.
Investment Quality Determines Long-Term Fiscal Impact
A lower debt-to-GDP ratio does not automatically provide unlimited fiscal flexibility. The ratio can decline when nominal GDP expands rapidly, even if government budgets continue to record deficits. Future debt dynamics will depend on economic performance, inflation trends, financing costs, currency movements and the scale of additional borrowing. The economic impact of public spending will also depend on the quality of investments. Financing transport infrastructure, utilities and other projects that increase productive capacity can strengthen future economic growth and improve the revenue base.
Projects with limited economic returns, however, may create additional maintenance obligations without delivering equivalent productivity improvements. Serbia’s fiscal challenge is therefore focused on maintaining favorable debt dynamics while improving the structure and efficiency of public expenditure. Preserving fiscal buffers below higher-risk debt levels will remain important if international borrowing conditions, energy prices or external demand deteriorate.
