Serbia Raises 2026 Revenue Forecast as Budget Rebalance Puts Spending Under Scrutiny

Serbia has increased its 2026 revenue and receipts forecast by RSD112.45 billion following stronger economic activity and higher-than-expected budget inflows, while raising its real GDP growth projection and reducing its inflation estimate. The government adopted amendments to the 2026 budget on 20 August 2026, lifting projected total revenues and receipts to RSD2,527.15 billion, up approximately 4.7% from the original RSD2,414.7 billion plan.

At the same time, the government revised its real GDP growth forecast to 3.3%, compared with 3% in the original budget, and lowered expected average inflation to 3.4%. The structure of the revenue revision, however, shows that most of the additional fiscal resources are coming from non-tax sources rather than the conventional tax base.

Non-tax receipts drive most of the revenue increase

Revised tax revenues are projected at RSD2,108.3 billion, only about RSD28.3 billion above the original estimate. Tax receipts therefore account for roughly 25% of the total RSD112.45 billion upward adjustment. Non-tax revenues have been raised to RSD382.9 billion, an increase of approximately RSD79.6 billion, representing around 71% of the additional revenue forecast. Tax revenues now account for 83.4% of revised total receipts, while non-tax revenues represent 15.2% and donations approximately 1.4%.

The distinction is relevant to the durability of the fiscal improvement. Tax receipts from VAT, corporate income tax, personal income tax and social contributions are more closely linked to the underlying tax base, while non-tax income can include dividends, fees, concessions, transfers and other receipts. The revised budget therefore gives the government additional room during 2026, while the composition of the increase provides less evidence of an equivalent expansion in recurring tax capacity.

Deficit target remains tied to spending decisions

The original 2026 budget provided for expenditure of approximately RSD2,751.7 billion and a deficit of RSD337 billion, equivalent to 3% of GDP. Capital expenditure was planned at 6.7% of GDP, reflecting simultaneous investment in roads, railways, energy infrastructure and projects connected with EXPO 2027 Belgrade.

The initial announcement of the rebalance did not include a revised aggregate expenditure figure or a new deficit projection. The eventual spending envelope will determine whether the additional revenues primarily finance new measures or reduce borrowing needs. Central government debt is forecast at 43.8% of GDP at the end of 2026, while general government debt is projected at 44.2% of GDP. Serbia’s Fiscal Council expects public debt to remain broadly on a declining trajectory, from approximately 44.7% of GDP at the end of 2025 to around 43.9% by 2029, assuming the planned fiscal framework is maintained.

One-off transfers add to household support

The amended budget is accompanied by one-off payments intended to offset energy costs and broader living expenses. Pensioners receiving up to RSD31,092.11 per month will receive RSD35,000, while pensioners with monthly pensions between RSD31,092.12 and RSD56,822 will receive RSD27,500. Those receiving pensions above that threshold will receive RSD20,000.

Recipients of child allowance, social assistance and veteran benefits are set to receive RSD25,000, while certain veterans outside the regular allowance system will receive RSD10,000. A separate RSD6,000 payment is planned for citizens who did not previously obtain holder status under Serbia’s free-share legislation. The government has also approved a 9.2% increase in the minimum hourly wage for 2027 to RSD405, equivalent to a monthly minimum of approximately RSD70,470, or around €600.

Investment programme remains at elevated levels

Serbia’s capital expenditure programme remains concentrated on transport infrastructure, defence and EXPO-related projects. The original budget’s allocation of 6.7% of GDP to capital investment places the country well above the EU average. The broader investment programme includes highways, railway modernisation, urban infrastructure and the EXPO 2027 development cycle, creating simultaneous demand for construction labour, engineering services, materials and contractor capacity.

President had indicated before the rebalance that additional resources would be directed towards roads. The Fiscal Council has repeatedly raised concerns about transparency and management of major public investment projects, including cases where costs on individual projects have exceeded contracted amounts by as much as 80%. The scale and composition of additional spending therefore remain important for determining the economic return from the higher capital allocation, particularly as Serbia’s financing costs remain above the exceptionally low levels recorded before 2022.

IMF framework keeps 3% deficit ceiling central

The revised fiscal position is being managed under Serbia’s IMF Policy Coordination Instrument. The IMF’s June assessment projected a general government deficit of approximately 3% of GDP in both 2026 and 2027 and called for additional fiscal support to remain temporary and targeted. The Fund has also recommended rationalising current expenditure and protecting investment if new spending pressures emerge.

Serbia is not operating under an IMF programme because of an immediate financing crisis. The framework provides a policy-credibility mechanism while the country implements a large public-investment programme. The government’s revised 3.3% GDP growth forecast is above the IMF’s June projection of 2.8%, while S&P Global Ratings had also projected Serbian growth of approximately 3.3% in 2026, supported by investment, household consumption, services and EXPO-related activity.

Higher economic growth can strengthen public finances through employment, wages, consumption and corporate profitability, supporting personal income tax, social contributions, VAT, excise duties and corporate income tax. At the same time, the government has reduced its expected 2026 average inflation rate to 3.4%, limiting the role of price increases in explaining nominal revenue growth.

Sovereign ratings remain linked to fiscal credibility

Serbia currently has different sovereign assessments from the three major rating agencies. S&P rates Serbia BBB- with a stable outlook, giving the country investment-grade status. Fitch rates Serbia BB+ with a positive outlook, one level below investment grade, while Moody’s maintains Ba2 with a stable outlook.

Fitch’s July review identified relatively low government debt, high foreign-exchange reserves, macroeconomic policy consistency and a stable exchange-rate framework as credit strengths. It also identified large current-account deficits, dependence on external financing and significant banking-sector euroisation as structural constraints. The IMF projects Serbia’s 2026 current-account deficit at approximately 6% of GDP, considerably wider than the fiscal deficit. Maintaining a fiscal deficit close to 3% of GDP, while public debt remains around the mid-40% range and capital spending exceeds 6% of GDP, therefore remains an important element of the country’s fiscal position.

Fiscal and monetary policy effects

The combination of one-off household payments, higher minimum wages and continued public investment has implications for domestic demand even as the government expects average inflation of 3.4%. Household transfers can increase consumption, retail turnover and VAT receipts, while higher infrastructure spending supports construction, engineering, transport and related businesses.

The monetary-policy implications depend on the persistence of demand and inflation pressures. Continued fiscal support can affect domestic demand more rapidly than infrastructure projects increase productive capacity, while elevated interest rates increase financing costs for households, companies and the sovereign. The banking sector can benefit from stronger transaction volumes, deposits and consumer demand, as well as lending opportunities associated with infrastructure construction and related corporate activity. A fiscal position that keeps the deficit at 3% of GDP or below, alongside growth above 3%, would provide a more favourable environment for declining sovereign yields and eventually lower domestic borrowing costs.

External financing remains a fiscal consideration

Foreign direct investment has historically financed a substantial portion of Serbia’s external financing requirement, while the IMF expects the current-account deficit to remain significantly wider than the fiscal deficit in 2026. A public-debt ratio around 44% of GDP provides Serbia with a buffer against external shocks, while remaining below the 60% of GDP Maastricht threshold.

Fitch’s positive outlook leaves scope for a future improvement in Serbia’s rating if stronger growth, controlled deficits and declining debt are sustained. A deterioration in fiscal discipline during the EXPO investment cycle would work against those credit strengths.

Revised revenue envelope awaits full spending picture

The amended budget raises projected revenues and receipts to RSD2.527 trillion, but the additional RSD112.45 billion should not be treated as equivalent to permanently recurring fiscal capacity. Only approximately RSD28 billion of the increase comes from taxes, compared with roughly RSD80 billion from additional non-tax receipts. The final expenditure allocation and deficit projection will determine how much of the additional revenue is used for household support, infrastructure investment, deficit reduction or other budget measures.

Serbia enters the final part of 2026 with a revised 3.3% real GDP growth forecast, 3.4% average inflation projection and general government debt forecast at approximately 44.2% of GDP, while maintaining S&P’s investment-grade rating and a 3% of GDP fiscal deficit anchor under its IMF policy framework. The fiscal implications of the rebalance will ultimately depend on the amended spending envelope and on whether the large investment programme surrounding EXPO 2027 strengthens productive capacity and the revenue base beyond the current construction cycle.