Serbia’s construction industry recorded stronger activity in the second quarter of 2026 while a renewed increase in material costs raised the expense of delivering projects across the sector. Construction activity increased by an estimated 9.0% year on year in Q2 2026, contributing approximately 0.4 percentage points to GDP growth. The value of completed construction works rose 9.7%, while the number of building permits increased 4.5%. Production of construction materials grew 2.5%, and imports of construction materials increased 3.5%, indicating continued demand for inputs as building activity expanded.
Construction Input Costs Accelerate
The increase in construction output coincided with a significant rise in material and component prices. Construction inputs were 10.8% more expensive year on year in June, compared with an annual increase of 7.6% in March. Prices also increased rapidly during the quarter, rising 4.0% on a quarterly basis. The combination of expanding physical activity and higher input prices is increasing the nominal cost of construction projects. The cost pressure comes as Serbia implements an infrastructure programme valued at €19.561 billion, covering roads, railways, municipal infrastructure and Expo-related construction. Residential construction is also expected to remain active.
Higher Costs Affect Project Economics
The increase in material prices creates particular pressure for contractors working under fixed-price agreements, where higher procurement costs can reduce project margins. Contracts containing escalation clauses can transfer a greater portion of the additional cost to clients. Public-sector projects may consequently require higher nominal expenditure to deliver the physical scope originally planned.
At the same time, bank financing is supporting continued activity across the construction and property sectors. Real estate and construction companies were among those recording the largest increases in borrowing, while corporate investment lending increased 14.6% year on year.
Labour and Equipment Become Key Constraints
As construction activity expands, capacity is becoming increasingly important across the market. Roads, railways, municipal projects, the Belgrade metro, residential developments and Expo construction are drawing on overlapping pools of engineers, skilled workers, equipment and construction materials. The combination of stronger demand, higher input prices and competition for construction resources is shaping the economics of projects across the sector. Construction activity therefore increased 9.0% year on year, while construction material and component prices rose 10.8% in June, creating a wider gap between the growth of physical output and the cost of delivering it.
