Serbia’s economy expanded 3.8% year-on-year in the second quarter of 2026, up from 3.2% in the first quarter, putting full-year growth on track to reach or exceed 3.3%, according to Raiffeisen Bank. The expansion is being supported by stronger household consumption, construction activity and public investment, while foreign direct investment inflows remain relatively weak.
Household consumption increased 4% year-on-year in the second quarter, while construction output rebounded 9.1%. Rising wages and pensions, credit growth and continued public infrastructure spending contributed to domestic demand. Agriculture and growing electric-vehicle exports from Stellantis also supported economic activity.
Public investment and household demand support growth
Construction remains closely linked to infrastructure projects associated with Expo 2027, as well as road, railway and other public works. The government has also announced approximately €980 million in additional measures supporting households, adding to domestic demand. These factors are increasing the contribution of consumption and government capital expenditure to overall growth at a time when FDI inflows are weaker. Serbia has relied heavily on foreign investment during the past decade to establish factories, expand exports and integrate domestic manufacturing into European supply chains.
Investment needs beyond Expo 2027
Raiffeisen estimates Serbia’s medium-term potential growth could decline toward 2%-3% annually after the current infrastructure and Expo investment cycle unless productivity, private investment and exports become stronger sources of expansion. The end of the current infrastructure cycle therefore places greater importance on the pipeline of private investment.
Serbia continues to attract manufacturing projects, including investments in pharmaceuticals, machinery and other industrial activities, but maintaining the growth model requires a broader flow of private capital rather than dependence on a limited number of major foreign projects. Domestic companies are also expected to play a larger role through their own investment activity. A weaker domestic investment response would leave economic expansion more dependent on foreign capital, public infrastructure programmes and household consumption.
Inflation limits monetary flexibility
The stronger growth outlook is accompanied by renewed inflationary pressure. Raiffeisen expects inflation to reach approximately 5.1% by the end of 2026, compared with annual headline inflation of 2.2% in August. Core inflation reached 4.7%, while housing and energy-related costs, transport, healthcare and services recorded faster price increases.
Stronger household spending, wage growth, government support measures and volatility in energy prices are contributing to the inflation environment. For the National Bank of Serbia, those developments provide less room for rapid monetary easing, leaving businesses with stronger economic activity alongside relatively restrictive borrowing conditions.
Growth drivers face a post-2027 transition
Agriculture, construction and Stellantis electric-vehicle exports are contributing to Serbia’s 2026 expansion, while public infrastructure spending continues to generate economic activity. The current growth composition places greater importance on the period following the peak of Expo 2027 construction and related infrastructure investment. The medium-term outlook will depend on the development of private investment, industrial exports and productivity as public capital expenditure normalises.
