Serbia’s economic growth in the first quarter of 2026 was strongly supported by household consumption, which outperformed both industrial production and construction activity, according to national accounts data for the period. Private consumption increased by 4.9% year-on-year in Q1 2026, contributing 2.9 percentage points to overall GDP growth. Retail turnover also recorded strong gains, rising by 9.3% in current prices and 8.6% in constant prices.
The data indicate that household spending was the primary driver of economic expansion during a period of relatively weak fixed investment and subdued industrial output.
Wage growth supports household spending capacity
The expansion in consumption is closely linked to rising incomes across the labour market. The average net wage reached RSD 118,736 in Q1 2026, representing an increase of 11.7% in nominal terms and 8.8% in real terms compared with the same period in 2025. In March 2026, the average net wage stood at approximately €1,036, up 12.4% year-on-year.
The increase in real earnings has strengthened purchasing power across key consumption categories, including food retail, household goods, hospitality services, domestic tourism, consumer services and imported durable goods.
Inflation moderates, enabling real consumption growth
Consumer price dynamics have provided additional support to household demand. Average annual inflation stood at 2.6% in Q1 2026, down from 4.5% a year earlier. The moderation in price growth has allowed wage increases to translate more directly into real consumption gains.
Price increases were concentrated in a limited number of categories, with electricity, healthcare services, utilities, tobacco and fruit accounting for more than half of the quarterly rise in consumer prices. Despite this, the broader inflation environment has eased compared with the previous year, supporting stronger real purchasing power.
Retail activity remains resilient into second quarter
Preliminary data for April 2026 indicate continued growth in household spending. Retail turnover in April 2026 increased by 8.3% in current prices and 5.6% in constant prices compared with the same month a year earlier.
The figures suggest that consumption momentum remained positive at the start of the second quarter, albeit at a slightly slower pace than in the first quarter.
Consumption-led growth faces margin constraints
Forecasts indicate that real household consumption is expected to grow between 3.5% and 4.5% in 2026, making it the strongest component of domestic demand despite a gradual slowdown from early-year levels. Rising costs present challenges for businesses serving consumer demand. Retailers and service providers are expected to benefit from higher turnover, but profit margins may be constrained by increases in labour costs, rent, logistics expenses and regulated utility prices. Banks are likely to see stronger card spending and consumer credit activity, while exporters may face higher wage costs without corresponding productivity gains.
Household demand becomes central growth driver
The data show that Serbia’s economic expansion is increasingly supported by household consumption rather than investment or industrial production. While consumption continues to lead growth, the divergence between strong household demand and weaker investment activity highlights an imbalance in the structure of economic expansion. Household spending remains the dominant driver of GDP growth in 2026, even as other sectors of the economy show more subdued performance.
