Serbia’s real GDP increased by 3.2% year on year in the first quarter of 2026, while seasonally adjusted output rose 0.2% from the preceding quarter, according to the latest Quarterly Monitor bulletin on economic trends and policy.
Professor Milojko Arsić, speaking at the presentation of the bulletin, said the first-quarter result was solid under current conditions, while noting that the composition of growth had become more exposed to weaker foreign direct investment, lower employment and accelerating inflation. Macroeconomic stability has broadly been preserved, Arsić said. Serbia’s annual growth rate remains positive, although the quarter-on-quarter figure indicates slower expansion during the opening months of the year.
External Conditions Affect Energy Costs and Investor Activity
Higher oil prices associated with the conflict in the Middle East, continued trade tensions and weaker confidence in global markets affected Serbia through energy costs, import prices and investor caution.
Arsić also cited EU carbon-related charges and sanctions affecting Naftna industrija Srbije (NIS) as temporary factors affecting the first-quarter economic picture.
Serbia’s principal trade and investment links remain connected to the European Union. Arsić said Serbia could record growth of around 3% in 2026, while identifying downside risks linked to weaker EU demand and further deterioration in international conditions.
Foreign Investment and Domestic Capital Formation
Serbia’s economic model has relied on foreign direct investment, infrastructure expenditure, manufacturing exports and exchange-rate stability. Foreign investment has supported employment, external financing, export-oriented industrial capacity and industrial upgrading.
Foreign direct investment inflows have weakened, while domestic private investment remains structurally low. Consumption, public projects and wage growth continue to support economic activity. The current-account deficit was unusually low in the first quarter. The lower deficit coincided with weaker foreign direct investment inflows and softer import and investment dynamics.
Inflation Rises From 2.4% to 3.5%
Inflation increased from 2.4% to 3.5% during the first five months of 2026, Arsić said. Higher global energy prices initially contributed to the increase, while domestic services inflation, wage growth and business costs also affected price developments.
The government reduced part of the energy-price impact through temporary excise-duty reductions and other measures. Energy-related support measures affect consumer prices, company costs and budget expenditure.
The National Bank of Serbia has maintained a cautious monetary-policy position and continued interventions in the foreign-exchange market to support dinar stability. Inflation pressures and external risks affect the scope for interest-rate reductions.
Wages, Employment and Export Costs
Real wages continued to rise strongly, supporting household purchasing power and consumption. Employment declined slightly, while wage growth exceeded productivity growth, according to Arsić. Labour costs affect unit costs, inflation and the price competitiveness of Serbian producers. These factors are relevant to export performance and industrial investment. Serbia’s exchange-rate framework supports companies, households and banks with euro-linked obligations. Foreign-exchange market interventions, inflation conditions and external financing affect the management of dinar stability.
Fiscal Targets and IMF Projections
Arsić warned that a more expansionary fiscal policy ahead of presidential and parliamentary elections could temporarily increase growth while affecting macroeconomic stability. The International Monetary Fund projected Serbian economic growth of 2.75% in 2026 and 4% in 2027. The Fund identified a fiscal-deficit ceiling of 3% of GDP for 2026 and 2027 and noted that persistent energy-related inflation could require tighter policy.
Public investment, infrastructure spending, fiscal measures, institutions, productivity and export competitiveness remain connected to Serbia’s medium-term growth model. Growth in the first quarter was supported by a 3.2% annual increase in GDP, while the 0.2% quarter-on-quarter expansion reflected slower seasonally adjusted output growth.
