Serbia’s agricultural sector is expected to make a significantly larger contribution to economic growth in 2026 than previously forecast, while increased food supplies are helping push consumer inflation lower.
The National Bank of Serbia has raised its forecast for agricultural production growth to around 7%, compared with 3% in its May projection. Agriculture is now expected to contribute approximately 0.3 percentage points to GDP growth, three times the contribution previously anticipated. The stronger agricultural outlook has contributed to the NBS raising its 2026 GDP growth forecast to 3.2% while lowering its projection for average inflation to 3.2%.
Wheat output remains near a record level
Wheat production illustrates the strength of this year’s harvest. Preliminary estimates put the 2026 yield at 5.9 tonnes per hectare, compared with 6.1 tonnes per hectare in 2025. Although the yield is slightly lower than last year, it represents the second-highest wheat yield on record. Increased cultivation area is expected to lift total wheat production by approximately 4.5%.
Corn production is projected to recover more sharply from last year’s weak harvest. The NBS’s agrometeorological model estimates a 2026 yield of around 5.6 tonnes per hectare, approximately 26.8% higher than in 2025. The central bank cautions that the projected corn yield would still remain below long-term averages. Weather conditions through the end of the growing season remain important, with late-summer temperatures and rainfall capable of affecting the final outcome.
Weather data enter central bank forecasting
The NBS has incorporated a MIDAS model into its agricultural projections, combining monthly and daily weather observations with annual wheat and corn yields. The model tracks temperature and precipitation throughout the crop cycle and incorporates previous harvest results as a base effect. This enables the central bank to revise agricultural production estimates before the harvest is fully completed.
For wheat, the model uses data covering 1990-2025 and identifies weather conditions from the preceding winter through June as materially relevant to yields. For corn, the model covers weather conditions from February through September, with summer rainfall identified as particularly important to production. Agricultural forecasting consequently forms part of the NBS’s broader macroeconomic assessment because food has a significant weight in Serbia’s inflation dynamics.
Food prices drive July inflation lower
The effect of the harvest was visible in Serbia’s July consumer-price data. Food prices declined 6.1% year on year, with fruit and vegetables accounting for a substantial part of the decrease. Headline inflation fell to 1.9%, while core inflation remained at 4.5%. The difference between the two measures reflects the significant contribution of agricultural products to the decline in overall consumer-price growth. Lower food prices also affect household purchasing power directly. Real disposable income can increase when food becomes cheaper even without additional wage growth. Real wages were already increasing by approximately 7% in April-May, meaning the combination of wage growth and lower food prices is supporting household purchasing power while the NBS maintains a relatively restrictive monetary-policy stance.
Higher supply does not automatically raise farm revenues
The impact on agricultural businesses is more complex. Larger harvests and lower consumer prices can put downward pressure on farm-gate revenues unless higher yields compensate for weaker prices. The NBS report does not provide estimates of farm-level profitability, so it does not establish how the changes in production and prices are affecting the financial performance of individual crops or agricultural producers.
Agricultural output also remains highly dependent on weather conditions. The NBS’s 7% growth forecast depends on conditions during the remainder of the season. The central bank noted that a strong heatwave and insufficient rainfall during the first half of August could reduce the expected recovery in corn production, although the very weak 2025 harvest makes a year-on-year increase highly likely.
Lower 2026 food prices create a 2027 base effect
The sharp decline in food prices during 2026 will also affect next year’s inflation comparisons. The low prices established during the 2026 harvest will create an unfavourable statistical base in 2027. The NBS expects this effect to contribute to inflation remaining slightly above 4% during 2027, even as international cost pressures moderate. Fruit and vegetable prices are particularly relevant to this effect. A one-off decline can substantially reduce the annual inflation rate in the current year, while stabilisation of those prices in the following year can raise year-on-year inflation without requiring a new acceleration in monthly prices.
Agriculture also has implications for Serbia’s external trade. Agricultural exports were affected in 2026 by the consequences of the previous year’s drought and depleted inventories. A larger 2026 harvest could replenish stocks and increase export availability into 2027, although the NBS report does not quantify the potential impact on agricultural exports. The agricultural outlook has therefore become an important component of both Serbia’s growth and inflation projections, with the 7% production-growth forecast contributing to the 3.2% GDP forecast while the stronger food supply is helping the NBS project average inflation of 3.2% for 2026.
