The European Bank for Reconstruction and Development (EBRD) has raised its 2026 growth forecast for Serbia to 3.1%, but higher electricity costs, disrupted Danube transport and weak industrial production continue to constrain the economic recovery. The revised forecast is 0.3 percentage points higher than the EBRD’s June projection, while its forecast for 2027 remains at 3.8%. The bank expects investment recovery and tourism to support activity, with energy vulnerabilities and political uncertainty identified as key risks.
Serbia’s economy grew by 2.0% in 2025, compared with 3.9% in 2024. Growth accelerated to 3.2% year on year in the first quarter of 2026 and 3.6% in the second quarter, supported by wage and pension increases and the recovery of tourism. Industrial production nevertheless declined slightly, leaving the recovery uneven. Stronger household spending has supported retail and other consumer-facing businesses, while manufacturing has yet to deliver a broad-based rebound.
External position improves as services surplus expands
Serbia’s external position strengthened during the first half of 2026, with the current account deficit narrowing by 30% year on year. The improvement reflected a smaller trade deficit and a larger services surplus. Foreign direct investment inflows increased slightly, although the EBRD described the inflows as volatile. The stronger services balance is providing support to the external position while manufacturers continue to face weak output and higher operating expenses.
Inflation has also declined. Headline inflation reached 1.9% in July, largely because of lower food prices, while core inflation remained at 4.5%. The central bank’s policy rate stood at 5.75%. Lower headline inflation supports household purchasing power, while higher core inflation can limit the scope for lower financing costs. Businesses therefore continue to operate with relatively expensive borrowing conditions despite the decline in overall consumer-price growth.
Wages and public spending support demand
Higher wages are contributing to domestic consumption but are simultaneously increasing labour costs for companies. The government also provided additional support to economic activity, with the budget deficit doubling year on year during the first half of 2026 as expenditure increased at a double-digit rate.
Public debt, however, declined to 43.8% of GDP at the end of June, providing a lower debt ratio even as government spending accelerated. Maintaining investment expenditure while responding to possible energy and supply disruptions could put additional pressure on public finances if revenue growth does not keep pace with expenditure.
Electricity prices increase industrial pressure
Electricity has emerged as a significant cost issue for Serbian companies. The average day-ahead wholesale electricity price reached €138.2/MWh in August, compared with €109.3/MWh in July and €108.1/MWh a year earlier. The August price represented increases of 26.5% month on month and 27.9% year on year.
Domestic electricity generation increased during the month, but the composition of generation changed as hydropower output declined. Hydroelectric generation fell by 31.2 GWh from July, while coal generation increased by 43.2 GWh, gas-fired generation by 40.9 GWh and wind generation by 42.4 GWh. Total electricity production rose by 174.8 GWh, broadly corresponding to the 169.6 GWh increase in consumption.
Wholesale prices expose supply-cost pressures
Higher domestic generation did not prevent Serbia from being exposed to price movements across interconnected electricity markets. The increase in thermal generation helped offset lower hydropower production, but additional generation capacity did not eliminate the impact of higher wholesale prices.
Regulated household tariffs limited the immediate effect on consumers, while companies had different levels of exposure depending on electricity contracts, contract duration and hedging arrangements. For manufacturers with greater exposure to market-based electricity prices, however, higher wholesale costs can put direct pressure on margins and increase the importance of energy efficiency, diversified procurement and system flexibility.
Low Danube levels disrupt fuel and commodities
Low water levels on the Danube created a separate supply-chain constraint. Barges operating in Serbia were carrying only 30–40% of normal capacity, while river-borne fuel imports in July reached approximately 20–25% of planned volumes. The figures refer to river deliveries rather than Serbia’s total fuel imports. The disruption nevertheless led to emergency diesel reserve releases, excise reductions and changes to supply logistics. Grain and other bulk commodities transported towards Constanța were also affected by the reduced river capacity.
Lower vessel loads require additional transport capacity to move equivalent quantities of goods, while delays and transfers to road or rail can increase freight costs and require companies to hold additional inventories and working capital.
Energy and transport vulnerabilities overlap
The combination of low Danube water levels and reduced hydropower production exposed overlapping vulnerabilities in Serbia’s energy and transport systems. Lower river levels can simultaneously restrict the movement of fuel and agricultural commodities and reduce hydropower generation, creating pressure on both supply chains and energy costs.
Government measures helped contain the immediate effects on fuel supply but did not restore river transport capacity. For companies dependent on bulk logistics, the disruption increased the importance of alternative transport routes, storage capacity and more resilient supply arrangements. The EBRD expects Serbia’s 3.1% growth in 2026 to be supported by investment recovery and tourism, while its 3.8% 2027 forecast points to continued expansion. The first half of 2026 recorded 3.5% growth, but the full-year forecast indicates some moderation from that pace as industrial production, energy costs and logistics conditions remain constraints.
