Serbia’s economy grew 3.8% year on year in the second quarter of 2026, accelerating from 3.2% in Q1, as construction, household spending and government-backed investment supported economic activity. Seasonally adjusted GDP increased 1.5% quarter on quarter, according to official data. Construction recorded the strongest growth among major sectors at 9.1%, followed by professional, scientific and technical activities at 5.8% and trade, transport, accommodation and food services at 4.4%. Household consumption rose 4.0%, government consumption 2.5%, and gross fixed-capital formation 3.3%. Exports of goods and services increased 4.1%, while imports grew faster, by 5.2%.
Construction and Retail Provide Strong Demand
Serbia’s infrastructure programme is supporting construction through investment in roads, railways, energy facilities and projects related to Expo 2027. Capital expenditure in the revised 2026 state budget is equivalent to around 7% of GDP. Retail activity has also remained strong. Real retail sales increased 8.2% year on year in July and 7.3% during the first seven months of 2026, while household credit was expanding at close to 20% annually by August. Rising wages and additional fiscal transfers are adding to household demand. At the same time, industrial production fell 2.3% year on year in July, highlighting the different performance of consumption and manufacturing.
Private Investment and Industrial Capacity
Gross fixed-capital formation increased 3.3% in Q2, below the growth rates recorded in construction and household consumption. Serbia has attracted substantial foreign direct investment into automotive components, metals, electrical equipment and other manufacturing sectors. Weaker European demand and restructuring among German and other European manufacturers are creating pressure across parts of the Serbian automotive supply chain.
Longer-term growth therefore depends on stronger private investment, technology adoption, engineering capacity, local supplier development and higher-value production.
Imports Rise Faster Than Exports
The national-accounts data showed exports growing 4.1% in Q2, compared with 5.2% growth in imports. Strong domestic demand can increase imports when domestic production does not expand at the same pace. Serbia’s merchandise trade position remained relatively favourable during the first seven months, with export growth exceeding import growth and the goods deficit narrowing year on year. The relationship between consumption, industrial output and imports will remain important during the second half of 2026.
Expo Investment Extends the Growth Cycle
Expo 2027 is providing additional support to construction and related sectors, with infrastructure spending also expected to benefit transport, tourism, services and consumption. Public investment can produce longer-term economic benefits when new infrastructure reduces business costs, improves connectivity or removes constraints on private activity. The longer-term impact will depend on whether infrastructure spending generates additional private investment after the current construction cycle.
Fiscal Policy Adds to Domestic Demand
The revised 2026 budget increased Serbia’s planned fiscal deficit from 3% to 3.5% of GDP, while maintaining high capital expenditure and additional household support. The stronger fiscal impulse is reinforcing consumption and construction. The Fiscal Council has argued that Serbia could otherwise have recorded a materially lower deficit in 2026.
Productivity Remains a Key Growth Factor
Long-term economic convergence depends on higher productivity, requiring greater technology investment, stronger skills, more efficient companies and deeper domestic participation in export supply chains. Recent projects in areas including batteries, robotics, data centres and higher-value engineering could broaden Serbia’s industrial base. Their contribution to productivity will depend on technology transfer, local supplier integration, engineering employment and the share of value retained in Serbia.
Second-Half Growth Will Depend on Its Composition
Serbia’s economy grew by roughly 3.5% during the first half of 2026, supported by construction, consumption and public investment.
The latest data also show weaker industrial production and imports growing faster than exports in the national-accounts measure. The performance of private investment, manufacturing and export capacity will therefore remain important as the country approaches the peak of its current infrastructure investment cycle.
