Serbian Firms Face Renewed Cost Pressures Despite Slowing Inflation

Serbia’s corporate sector is preparing for renewed increases in raw-material, energy and production costs despite a decline in headline inflation, with fewer companies expecting stronger production and turnover growth during the coming months. Consumer prices increased 2.7 per cent year on year in June 2026, down from 3.5 per cent in May, while monthly inflation stood at 0.2 per cent, according to the latest data. Business expectations collected in the inflation expectations survey of the National Bank of Serbia indicate that companies continue to face significant cost pressures.

The share of businesses expecting higher input prices and production costs over the next three months increased to 35 per cent in June, compared with 26 per cent in May. Over a 12-month period, 47 per cent of companies expect input prices to rise, compared with 39 per cent one month earlier.

Companies Maintain Higher Price Expectations

The increase in corporate cost expectations came as measured consumer inflation was declining, indicating that businesses do not consider the lower June inflation figure to represent a permanent improvement in the operating environment. Companies are factoring in possible increases in commodity purchases, electricity costs, wage expenses and transport charges when planning future operations.

Corporate pricing expectations have also remained elevated. The share of businesses reporting higher selling prices stood at 39 per cent in June, while the proportion expecting to increase output prices over the next year rose from 53 per cent to 55 per cent. More than half of surveyed companies are therefore preparing either to transfer part of their higher costs to customers or to protect profitability through selective price adjustments. The situation does not indicate a return to the inflation levels recorded during earlier energy and food-price shocks, but it shows that companies continue to experience cost pressures not fully reflected in consumer inflation data.

Industrial Supply Chains Face Margin Pressure

Manufacturers, construction companies, food processors, transport operators and retailers operate with different input structures compared with the consumer price basket. Businesses remain exposed to prices of imported intermediate goods, metals, chemicals, packaging materials, machinery components, fuels, electricity, freight services and labour.

The issue is particularly relevant for Serbia’s industrial exporters, many of which are integrated into European automotive, electrical-equipment, machinery, metals and consumer-goods supply chains. Companies may face a combination of higher imported input costs and weaker demand from major European markets, limiting their ability to pass expenses fully to customers. Businesses operating under annual framework agreements or fixed-price export contracts face additional pressure because wage, energy and raw-material increases can directly reduce operating margins when contract prices cannot be adjusted quickly.

Large manufacturers can partly manage these risks through procurement agreements, currency hedging, energy purchasing strategies and supplier diversification. Smaller companies generally have fewer tools available and rely more heavily on working-capital financing.

Short-Term Business Expectations Weaken

Corporate expectations for near-term activity have deteriorated. The share of companies expecting production or turnover growth over the next three months declined from 41 per cent in May to 33 per cent in June.

At the same time, 64 per cent of businesses expect no change in activity, leaving a smaller group anticipating stronger short-term expansion. Expectations improve over a 12-month horizon, with 48 per cent of companies forecasting higher production or turnover. 51 per cent expect business volumes to remain unchanged, indicating that companies are not anticipating a broad private-sector acceleration. The cautious outlook is consistent with industrial performance data. Serbia’s industrial production increased only 0.3 per cent year on year in May, suggesting broadly flat activity following volatility earlier in the year.

Corporate Conditions Remain Uneven

Earlier data from the Serbian Chamber of Commerce showed a divided corporate environment. During the first quarter, 41 per cent of surveyed companies reported lower turnover compared with the final quarter of 2025. Among those businesses, average turnover declined by 27 per cent.

Only 19 per cent of companies recorded growth, but those reporting increases achieved an average improvement of 24 per cent. The June survey indicates that earlier optimism has become more cautious. Investment activity linked to Expo 2027, public construction, transport projects and energy infrastructure continues supporting selected sectors.

Production of electric vehicles and renewed activity in oil processing may also contribute to industrial output, but these developments do not create equal demand conditions across all small and medium-sized enterprises, especially those dependent on household consumption or weaker European industrial markets.

Businesses Hold Inflation Expectations at 5 Per Cent

Corporate inflation expectations remain stable but elevated. Companies expect inflation of 5 per cent over the next year, unchanged for the third consecutive month and remaining around that level since the beginning of 2025. Expectations for inflation two and three years ahead also remain at 5 per cent.

Persistent expectations matter because companies incorporate projected price increases into wage negotiations, supplier agreements, investment calculations and sales strategies. The difference between official inflation data and corporate expectations can therefore influence future pricing decisions even after external inflation shocks have weakened.

Banks and Households See Different Inflation Paths

Financial institutions have a more moderate outlook. Banks and financial organisations reduced their one-year inflation expectations from 4 per cent in May to 3.6 per cent in June. Their medium-term expectations stood at 3.5 per cent for two years ahead and 3 per cent for three years ahead.

Household expectations remain significantly higher. Consumers reduced their one-year inflation forecast from 15 per cent to 10 per cent, the lowest level since June 2024, but still well above business and financial-sector expectations. Household inflation expectations for the medium term also remained at 10 per cent. The three groups reflect different economic experiences. Financial institutions focus on monetary policy and inflation targets, companies respond to supplier costs, wages and financing expenses, while households are influenced by frequently purchased goods such as food, utilities and housing.

Monetary Policy Remains Cautious

The corporate survey supports a cautious approach by the National Bank of Serbia. The central bank kept its reference interest rate at 5.75 per cent in July 2026, unchanged during the first seven months of the year. Although consumer inflation remains within the target range, corporate inflation expectations at 5 per cent create concerns that premature easing of borrowing conditions could reinforce price-setting behaviour.

For companies, this creates a challenging financing environment. Interest rates remain high relative to weak industrial growth, while businesses must finance inventories and receivables amid uncertain input prices. Companies with limited liquidity may reduce inventories, postpone investment projects or shorten payment terms, creating additional pressure across domestic supply chains.

Investment Focus Shifts Toward Efficiency

The stable dinar continues to limit the impact of euro-denominated imports and foreign-currency debt on local costs. It does not eliminate exposure to global commodity prices, energy-market volatility, transport disruptions or changes in European industrial input costs.

Exporters face additional pressure because they must recover higher expenses in markets where customer demand remains relatively weak. Investment decisions are becoming more selective, with stronger focus on projects that reduce electricity consumption, automate production, improve material efficiency or replace imported inputs. Traditional capacity expansion is more difficult to justify when only 33 per cent of companies expect near-term growth and nearly half anticipate higher input prices.

Different Industries Face Different Cost Risks

Cost pressures vary significantly by sector. Food processing and agriculture remain sensitive to weather conditions, fertiliser prices, fuel costs and packaging expenses.

Construction companies face labour shortages, material-price volatility and exposure from fixed-price contracts. Metals and chemicals producers remain highly exposed to energy and commodity markets. Retailers have greater flexibility to adjust prices but face resistance from consumers with elevated inflation expectations.

Export manufacturers often have more stable demand, but their pricing power remains limited by multinational buyers and competition within European supply chains.

Companies Prioritise Stability Over Expansion

Despite cost concerns, most businesses continue to describe operating conditions as stable. Around three-quarters of companies reported no change in business conditions during the previous three months, while 71 per cent expect no change over the next year.

The outlook reflects an economy where companies are maintaining operations while focusing on protecting liquidity and margins rather than entering a strong investment cycle. Serbia’s June inflation data provides evidence of slower consumer price growth, but corporate expectations indicate that businesses continue preparing for higher operating costs, weaker short-term growth momentum and continued pressure on profitability during the second half of 2026.