Serbia’s economy demonstrated notable resilience in early 2026, with a year-on-year growth rate of approximately 3% in the first quarter, according to the latest report from the monthly Macroeconomic Analyses and Trends (MAT) bulletin. This growth places Serbia among the stronger performers in Europe; however, persistent inflation continues to challenge household finances and complicate the overall economic landscape.
The recent growth follows a slower economic performance in 2025, where the full-year growth was recorded at around 2%. Contributing factors to this slowdown included reduced industrial activity, diminished demand from European markets, and disruptions within the regional manufacturing sector. The latest quarterly data indicates a partial recovery, although it remains below levels seen during the post-pandemic economic rebound.
Key sectors contributing to the first-quarter growth included services, trade activities, and net taxes. In contrast, construction and certain segments of industrial production have not shown the same level of recovery. This shift highlights a changing economic structure in Serbia, where consumption and services are increasingly outpacing industrial and export-driven sectors reliant on broader European manufacturing trends.
Industrial performance showed signs of improvement, particularly in March, when Serbia’s industrial production grew by 6.4% year-on-year, with manufacturing output rising by 8.4%. This improvement was partly attributed to the Pančevo Oil Refinery’s temporary return to normal operations after previous disruptions. Analysts noted that these refinery operations significantly influenced manufacturing statistics following earlier maintenance-related declines.
External trade conditions also showed positive movement, with merchandise exports increasing by 15.4% in March while imports rose by 6.3%. This resulted in a more than 23% reduction in Serbia’s trade deficit compared to the previous year. The export coverage of imports improved to 84.5% during the January-March period, up from 79.1% year-on-year, indicating better external balance despite ongoing pressures from energy imports and industrial inputs.
On the fiscal side, Serbia recorded a budget deficit of approximately RSD 97.9 billion in the first quarter, which was significantly lower than anticipated and about RSD 80 billion below initial government projections. This stronger-than-expected fiscal outcome is attributed to robust VAT collections, heightened import activity, and ongoing public revenue growth driven by inflation and wage increases.
Despite these positive developments, inflation remains a critical concern for the Serbian economy. Unlike many European nations that have seen a decline in consumer price growth following the energy crisis of 2022-2024, Serbia continues to experience elevated domestic price pressures due to rising wages, food price fluctuations, imported inflation, and high service-sector costs. As a result, inflation rates exceed broader European averages, restricting potential monetary easing measures by the National Bank of Serbia.
The complexity of Serbia’s economic landscape presents challenges for policymakers. While growth rates outpace those of many European counterparts, the nature of this growth is increasingly reliant on state-backed investments, infrastructure projects, services, and public spending rather than widespread industrial expansion. Additionally, ongoing weaknesses in certain segments of European heavy industry impact Serbia’s export manufacturing capabilities—particularly within automotive supply chains and metal production.
The broader European economic environment remains uncertain due to Germany’s industrial slowdown and reduced manufacturing demand across the eurozone alongside geopolitical tensions affecting energy markets. Given Serbia’s significant integration into European supply chains, sustained recovery will hinge on whether European industrial demand stabilizes later in 2026.
The robust GDP figures for the first quarter provide Serbian authorities with enhanced political and financial flexibility as they prepare for significant state investment initiatives related to transport infrastructure and energy projects while gearing up for EXPO 2027 Belgrade. Concurrently engaging with international debt markets and attracting foreign industrial investments positions Serbia as one of Southeast Europe’s faster-growing economies amid broader continental stagnation.
