Serbia is planning to limit its budget deficit to 2.75% of GDP, as the government seeks to balance continued infrastructure and Expo spending with tighter fiscal management. The government expects the deficit to remain within the 2.75% ceiling. The target remains a Serbian government position and has not been endorsed by the International Monetary Fund (IMF) as the outcome of its current review. The IMF is conducting a review of Serbia’s three-year Policy Coordination Instrument (PCI). The review is part of the programme’s regular assessment process.
Fiscal policy shifts after higher spending
The proposed deficit target would follow a loosening of fiscal policy. The Fiscal Council said a budget revision raised the planned deficit from 3% to 3.5% of GDP, despite stronger-than-expected revenues that could otherwise have resulted in a significantly smaller shortfall.
The government has justified the additional expenditure as support for living standards, investment and economic growth, while maintaining public debt at moderate levels. The revised budget assumes 3.3% economic growth and general government debt of approximately 44.2% of GDP at year-end. The planned fiscal adjustment will therefore take place alongside continued large-scale public investment.
Expo and infrastructure remain major commitments
Serbia is preparing for Expo 2027 while continuing major programmes covering railways, roads, urban transport, energy and other infrastructure. Government expenditure connected with Expo and infrastructure is expected to remain an important contributor to economic growth. The IMF projects Serbian GDP growth of around 4%, following 2.8%, with infrastructure investment, recovering agriculture, new manufacturing capacity and Expo-related activity among the supporting factors.
At the same time, the investment cycle is increasing pressure on public finances. Under the existing PCI framework, Serbia has committed to keeping the general government deficit at no more than 3% of GDP. The IMF has indicated that maintaining this fiscal anchor could require tighter control of current expenditure and greater prioritisation of investment if external pressures increase. A 2.75% target would consequently provide less fiscal room than the existing programme ceiling.
Energy costs add fiscal pressure
Energy prices remain a significant external fiscal risk for Serbia’s consolidation plans. The government has used temporary reductions in fuel excise duties and other measures to protect households and businesses from higher oil costs. The IMF has said such measures should remain temporary and targeted because prolonged fuel support would raise fiscal costs and weaken price signals. A renewed energy shock could therefore create competing demands for consumer protection, infrastructure investment and compliance with the lower deficit target.
The IMF has also identified fiscal risks associated with Roads of Serbia and the City of Belgrade, while calling for stronger public-investment management and systematic cost-benefit analysis of new projects. These considerations become increasingly relevant as Serbia takes on infrastructure programmes extending across multiple years, with costs continuing beyond Expo-related construction.
Public-investment management gains importance
The government has indicated that it intends to maintain the investment cycle, making the allocation of available fiscal resources increasingly important as the deficit target becomes tighter. The existing framework requires Serbia to balance infrastructure spending with expenditure controls, while the IMF has called for stronger investment management and more systematic assessment of project costs and benefits.
Serbia enters this period with moderate public debt, high foreign-exchange reserves and a well-capitalised banking system, which the IMF has identified as buffers against external shocks. The planned move from a 3.5% deficit to a 2.75% target would nevertheless require tighter control of public spending while major infrastructure and Expo-related programmes remain underway.
