Serbia’s real GDP growth rebounded to 3.5% in the first half of 2026, the European Commission’s Serbia 2026 Report said. Dated 4 November 2026, the report also points to weaker foreign investment and eroding cost competitiveness as challenges for the expansion.
Private consumption and construction were the main drivers of the rebound. Rapid growth in wages, pensions and the minimum wage supported consumer spending. The report linked the slowdown in 2025 to domestic political instability, sanctions affecting Serbia’s sole oil refinery, and global uncertainty over tariffs and trade.
Net foreign direct investment fell sharply in 2025 from the previous year’s record level to around 2.5% of GDP, weakening investment sentiment. GDP per capita in purchasing-power terms was about 52% of the EU average. Serbia continued to converge with the EU, but the measure changed little from 2024.
Wage growth continued to exceed productivity growth, while Serbia’s unit-labour-cost-based real effective exchange rate appreciated, eroding the country’s cost position relative to trading partners. The previous growth model relied heavily on subsidised foreign investment, comparatively low labour costs, infrastructure spending and domestic consumption.
The Commission’s assessment indicates that the next phase of growth will depend more on productivity, domestic supplier development, innovation, energy modernisation and better governance of public investment. Without a shift toward that model, faster growth could return without a comparable improvement in competitiveness.
