Serbia recorded real GDP growth of 3.2% year-on-year in Q1 2026, accelerating from 2.2% in Q4 2025, according to quarterly national accounts data. Seasonally adjusted GDP increased by only 0.2% quarter-on-quarter, indicating limited underlying momentum despite stronger annual growth figures.
The structure of growth shows a narrow expansion base, with households, government spending, and services contributing most of the increase, while construction and industry remained weak across the quarter.
Domestic demand led by private and public consumption
Private consumption was the largest contributor to economic growth in Q1, increasing by 4.9% and adding 2.9 percentage points to GDP expansion. Government consumption rose by 5.1%, while exports increased by 4.6% and imports by 3.6%.
Fixed investment grew by only 1.4%, contributing just 0.3 percentage points to GDP. The low level of investment expansion is highlighted as a key constraint for sectors linked to manufacturing, logistics, energy infrastructure, and nearshoring activity.
Sector performance shows divergence between services and industry
On the production side, services excluding trade contributed 2.1 percentage points to overall GDP growth. Trade expanded by 6.4%, while agriculture rose by 7.1%.
In contrast, key productive sectors weakened. Construction output declined by 5.1%, while industry and water supply contracted by 0.7%. The data indicate that Serbia’s growth is being driven primarily by services and domestic demand, rather than industrial production or investment-led expansion.
Investment weakness limits industrial recovery
The limited expansion in fixed investment remains the central constraint in the first-quarter performance. While consumption and services provided momentum, the investment cycle has not yet recovered at a level sufficient to support stronger industrial output. For an economy positioned around manufacturing capacity, energy projects, logistics infrastructure, and export-oriented production, the investment component is identified as the key indicator of medium-term growth sustainability.
Growth forecasts reflect divergence in structural expectations
The baseline outlook for Serbia in 2026 places GDP growth in a range of 2.8% to 3.3%, with potential upside toward 3.5% if investment, construction, and manufacturing strengthen in the second half of the year.
The International Monetary Fund (IMF) projects Serbia’s 2026 growth at 2.8%, while the European Bank for Reconstruction and Development (EBRD) has issued more optimistic forecasts of around 3.9% for 2026 and 2027.
The difference in projections reflects contrasting assumptions about the pace of recovery in capital investment, infrastructure execution, and export manufacturing expansion.
Growth composition highlights dependence on consumption cycle
The first-quarter structure indicates that Serbia’s current expansion is driven primarily by household consumption, public spending, and service-sector activity, while the industrial base and construction sector continue to lag.
This composition suggests that while overall GDP growth remains positive, the underlying investment cycle has yet to reassert itself as the main driver of economic expansion.
