Serbia’s economy recorded stronger annual growth in the second quarter of 2026, with real gross domestic product (GDP) increasing 3.6% compared with the same period a year earlier, according to the Statistical Office of the Republic of Serbia. The flash estimate marks an acceleration from the revised 3.2% annual growth reported for the first quarter and represents a notable improvement from the approximately 2.1% growth recorded in the second quarter of 2025.
- Consumer Spending Supports Economic Expansion
- Industrial Activity Remains Mixed
- Trade Performance Improves External Position
- Public Investment Continues Through Infrastructure Programme
- Labour Market Shows Sectoral Employment Declines
- Fiscal Position and Credit Profile Receive Support
- Monetary Policy Remains Unchanged
Based on the first two quarterly results, Serbia’s economy expanded by roughly 3.4% during the first half of 2026, although the final half-year figure remains subject to quarterly weighting and future revisions. A detailed breakdown of GDP by production sectors and expenditure components is scheduled for publication on 31 August. The latest reading places Serbia on course to meet the National Bank of Serbia’s forecast of 3% GDP growth for 2026. Other international forecasts remain lower, with the International Monetary Fund projecting approximately 2.8%, the World Bank 2.7%, and the Vienna Institute for International Economic Studies forecasting 2%.
Consumer Spending Supports Economic Expansion
Although annual growth accelerated, the absence of seasonally adjusted quarterly GDP data means the strength of short-term economic momentum remains uncertain. Serbia recorded quarter-on-quarter GDP growth of only 0.2% during the first three months of 2026, indicating that part of the annual increase reflects a weaker comparison base from 2025. Household consumption continued to provide significant support to economic activity during the spring.
Retail trade increased 7% in real terms during the first six months of 2026, while June retail turnover rose 4.3% year on year in real terms. Growth in wages, pension adjustments and government expenditure supported consumer demand despite elevated borrowing costs that continued to weigh on some credit-financed purchases and investment decisions.
Inflation eased further during the period. Annual consumer price growth slowed to 2.7% in June, down from 3.5% in May, moving below the National Bank of Serbia’s central inflation target of 3% while remaining within its tolerance band of 1.5% to 4.5%. Average net earnings reached RSD118,398 in May, while real net wages during the first five months of 2026 increased 8.2% compared with the same period of 2025. Median net earnings stood at RSD93,277. The combination of moderating inflation and higher real wages contributed to stronger household purchasing power and continued retail activity.
Industrial Activity Remains Mixed
Industrial production continued to expand but at a moderate pace. Output increased 0.8% year on year in June, following growth of 0.3% in May and 3.4% in April.
Manufacturing benefited from the recovery of refinery operations together with stronger production in selected automotive, electrical equipment, mining and metals industries. The data did not indicate broad-based industrial expansion across the sector. Manufacturing remains central to Serbia’s export-oriented economy, making industrial performance an important factor for medium-term economic growth.
Trade Performance Improves External Position
Foreign trade data provided stronger support for economic activity during the first half of the year. Merchandise exports increased 8.3% to €17.97 billion, while imports rose 3.7% to €21.68 billion. The merchandise trade deficit narrowed 14.1% to €3.71 billion, while export coverage of imports improved from 79.4% to 82.9%. Leading export products included automotive vehicles, vehicle wiring systems, copper ore, refined copper, electrical equipment and automotive components.
June, however, produced a different pattern. Monthly exports increased 9% year on year to €3.21 billion, while imports rose 17.3% to nearly €3.99 billion. Seasonally adjusted data showed imports increasing 12.7% from May, compared with 4% growth in exports. Higher imports may partly reflect stronger investment and industrial activity through purchases of machinery, components and intermediate goods. Serbia also remains dependent on imported crude oil, natural gas and electricity during periods of lower domestic generation, leaving the economy exposed to commodity-price movements and geopolitical risks.
Public Investment Continues Through Infrastructure Programme
Construction remained one of the less certain contributors to economic activity. After contracting during parts of 2025, the value of completed construction work declined 5% in real terms during the first quarter of 2026. At the same time, Serbia continues to implement a major public investment programme focused on transport infrastructure, utilities, energy projects, urban development and preparations for Expo 2027.
The 2026 state budget allocates approximately RSD602 billion, equivalent to more than €5 billion, for capital expenditure. The programme includes investments in roads, railways, utility infrastructure, energy facilities and Expo-related projects.
Labour Market Shows Sectoral Employment Declines
Employment trends differed across sectors during the second quarter. Registered employment in manufacturing declined by 17,422 workers, while mining and quarrying recorded a reduction of 1,134 employees. Employment in wholesale and retail trade, including motor vehicle repair, fell by 4,276.
Output can continue to grow despite lower employment through productivity gains, automation, restructuring or changes in formal employment registration. At the same time, Serbia continues to face labour shortages driven by demographic trends, outward migration and limited availability of qualified technical personnel. Manufacturers, engineering companies, construction firms and service providers continue to experience pressure from shortages of skilled workers.
Fiscal Position and Credit Profile Receive Support
The stronger GDP reading provides support for Serbia’s fiscal position by strengthening tax revenues, payroll contributions and corporate income while helping stabilise public debt relative to GDP. The 2026 state budget targets a fiscal deficit of up to 3% of GDP, in line with the ceiling established under the IMF Policy Coordination Instrument.
Capital investment, public-sector wages, pensions, energy-related measures and obligations connected with state-owned enterprises remain potential sources of fiscal pressure. Serbia currently holds a BBB- sovereign credit rating with a stable outlook from S&P Global Ratings, a BB+ rating with a positive outlook from Fitch Ratings, and a Ba2 rating with a stable outlook from Moody’s. Stronger economic growth, moderating inflation and a narrower trade deficit improve Serbia’s macroeconomic profile, although financing conditions continue to depend on fiscal discipline, policy consistency, external market conditions and developments in the energy sector.
Monetary Policy Remains Unchanged
The National Bank of Serbia has maintained its key policy interest rate at 5.75% since September 2024. With inflation easing to 2.7%, the real policy rate has become more restrictive, creating scope for future monetary easing. However, global interest rates, energy prices and geopolitical developments continue to influence inflation risks.
Lower borrowing costs would improve financing conditions for Serbian companies and households, reduce working-capital costs for exporters and domestic suppliers, and support dinar-denominated lending. The detailed national accounts due at the end of August will provide further information on the relative contributions of household consumption, government expenditure, investment, inventories and net exports to the second-quarter growth result, as well as the role of manufacturing and capital investment in the acceleration of economic activity.
