Serbia’s republican budget recorded a 99.7 billion dinars deficit in the first five months of 2026, outperforming the Ministry of Finance’s plan by 101 billion dinars. The planned shortfall for the January–May period had been set at 200.7 billion dinars.
The result reflected stronger-than-expected revenue collection while expenditure execution remained broadly aligned with budget plans. The narrower deficit was recorded despite continued spending on public-sector salaries, pension-related transfers, capital projects and interest costs.
May Budget Near Balance
In May alone, the republican budget posted a deficit of just 56 million dinars. Total revenues reached 206.3 billion dinars, matching total expenditures of 206.3 billion dinars during the month. Tax receipts accounted for 178.7 billion dinars of May revenue. Value-added tax generated 86.9 billion dinars, making it the largest individual tax category. Excise duties contributed 28.6 billion dinars, while corporate profit tax receipts totalled 27.2 billion dinars and personal income tax generated 27 billion dinars. Non-tax revenue amounted to 25.8 billion dinars, while donations added 1.8 billion dinars.
Consumption and Corporate Taxes Support Revenue
The May revenue structure was led by VAT receipts, supported by taxes linked to corporate earnings, wages, imports and domestic spending. VAT collections reflected activity in consumption, retail turnover and imported goods, while profit and income taxes contributed to the overall fiscal result.
The first five months of 2026 coincided with estimated real GDP growth of about 3.6% year on year, while inflation remained within a manageable range. Revenue performance during the period was supported by taxable turnover, wage flows and corporate income.
Wage, Social and Capital Spending Remain Major Items
Employee expenditure was the largest spending category in May at 55.6 billion dinars. Transfers to mandatory social insurance organisations reached 32.1 billion dinars, covering the pension fund, health insurance fund, employment service and military social insurance fund.
Capital expenditure totalled 31.8 billion dinars. Spending on goods and services amounted to 18.4 billion dinars, while subsidies and interest payments each reached 16.7 billion dinars.
The level of capital expenditure maintained public investment as one of the larger components of the budget. Budget allocations for infrastructure are relevant to construction, transport, engineering, materials, energy infrastructure, public buildings and utility projects.
Interest Costs Weigh on General Government Balance
Interest payments of 16.7 billion dinars in May remained a significant fiscal expenditure. The broader general government sector reported a deficit of 106.5 billion dinars in the January–May period, compared with a primary fiscal deficit of 35.9 billion dinars. The difference between the general government deficit and the primary deficit reflected the impact of debt-servicing costs on public finances.
Public-sector wages, pensions, social insurance transfers, subsidies and infrastructure investment continued to account for substantial budget commitments. Subsidies remained allocated across areas including energy, transport and agriculture.
Lower Deficit Improves Borrowing Flexibility
The smaller-than-planned republican budget deficit reduced the gap between public revenue and expenditure during the first five months of the year. A deficit of 99.7 billion dinars, compared with the planned 200.7 billion dinars, provided the Ministry of Finance with additional flexibility in managing financing needs during the second half of 2026.
Revenue trends in VAT, corporate profit tax and wage-related taxes will remain relevant to budget execution, alongside capital spending, social transfers, employee costs and interest payments. The general government deficit will also depend on the pace of infrastructure delivery and expenditure across public investment programmes.
