Serbia has increased its 2026 budget deficit target to 3.5% of GDP from 3.0%, expanding planned fiscal support as the government combines household assistance with additional spending on defence and roads. The government’s support package has grown to about €980 million from €600 million. Fitch Ratings expects the measures to have a modest fiscal impact but has identified risks to Serbia’s policy credibility. The revised deficit target highlights the balance between supporting domestic demand and maintaining the fiscal limits established under Serbia’s International Monetary Fund programme.
Deficit target and IMF framework
The IMF said the 3% deficit ceiling was consistent with Serbia’s programme policy framework while allowing space for priority investment. The additional government transfers are expected to provide a temporary lift to consumer spending. For businesses, however, the longer-term effect depends on whether stronger sales translate into private investment and productivity improvements. Higher payments can increase demand quickly, but they do not by themselves expand production capacity or improve export competitiveness.
Temporary spending and 2027 plans
Fitch Ratings has focused on the potential influence of political pressure on fiscal decisions. The government’s ability to withdraw temporary measures is therefore important alongside their initial budgetary cost. One-off transfers leave greater scope for expenditure reductions in subsequent budgets than permanent increases in wages, pensions or other benefits. Because temporary payments account for a large part of the package, Serbia could still return to a 3% deficit target in 2027. The government projects public debt at 44.2% of GDP at the end of the year and is relying in part on stronger economic growth to offset the impact of the wider deficit.
Growth outlook and fiscal credibility
The economic recovery therefore carries greater importance for the fiscal outlook. The EBRD’s September forecast puts Serbia’s growth at 3.1% in 2026 and 3.8% in 2027, with investment and tourism linked to Expo 2027 expected to support activity. The EBRD also identifies energy supply vulnerabilities and political tensions as risks to the outlook.
For investors and lenders, a wider deficit does not necessarily create an immediate challenge to debt sustainability. The more significant issue is the reliability of fiscal commitments when political pressures increase. Repeated departures from previously established targets could make future consolidation less credible and add uncertainty to Serbia’s financing requirements. The current spending package provides businesses with an immediate increase in demand. Its fiscal impact will depend on whether the temporary support expires and Serbia returns its deficit to the stated 3% limit in 2027.
