Household consumption has become a major contributor to Serbia’s economic growth, supported by rising real wages, moderating inflation and expanding retail activity. Real retail turnover increased by 7.2% in the first eight months of 2026, while August sales were 6.3% higher year on year.
The increase has coincided with double-digit nominal wage growth and inflation falling close to the central bank’s target range, strengthening household purchasing power.
Wage Growth Supports Household Purchasing Power
Average net wages in July were 11.3% higher in nominal terms and 9.2% higher in real terms than a year earlier. Across the January-July period, real wages increased by 8.5%.
According to MAT, the average net wage in June was 8.6% above the value of the average consumer basket. Although the median wage remains substantially below the average, the figures indicate a rapid improvement in household purchasing power.
The combination of higher real incomes and stronger retail activity has reinforced consumption as a source of economic growth. Lower inflation has increased the purchasing power of wages, while rising household incomes have supported spending and corporate turnover. Stronger consumption has also contributed to tax receipts, while improved credit conditions have enabled households to bring forward some purchases.
Retail Growth Also Reflects Base Effects and Policy Support
MAT has identified several factors affecting the retail figures beyond underlying household demand. The comparison with the previous year is influenced by a weaker base, following political disruption and boycotts of some major retailers.
Fuel sales have also contributed to the increase. Panic buying in March, following the outbreak of war in the Middle East, lifted turnover in motor fuels. Real turnover in the category rose by 7.7% during January-August, including an exceptional year-on-year increase in March.
Government measures are providing an additional source of support. The authorities have adopted an economic and social package valued at approximately EUR 980.6 million, which MAT expects to underpin demand during the second half of the year.
Household Borrowing Adds to Consumption Momentum
Consumer spending is also being supported by the expansion of household credit. Cash loans and other forms of borrowing are growing rapidly, adding another source of financing for household expenditure.
Together, rising real wages, lower inflation and expanding borrowing have strengthened the consumption cycle. Higher purchasing power supports retail activity, while improved credit conditions give households additional scope to increase spending.
Industrial Output and Productivity Remain Key Constraints
The pace of household demand growth is running ahead of developments in Serbia’s industrial sector. Manufacturing activity remains close to stagnation, in contrast with the strong increase in retail volumes.
If wage growth continues to exceed productivity gains, the difference between domestic demand and productive capacity could eventually feed through into higher imports, a wider current-account deficit or renewed inflationary pressure in domestic services. The sustainability of consumption growth will therefore depend partly on how the economy performs once favourable comparison effects diminish, the impact of fiscal support is absorbed and wage increases become more closely linked to productivity developments.
