Serbia’s economy grew an estimated 3.6% year on year in the second quarter of 2026, but the composition of that expansion is becoming increasingly uneven as consumer demand accelerates while industrial activity remains subdued. Retail turnover rose 7% in real terms during the first half of 2026, while real retail growth reached 4.3% year on year in June. Industrial production, by comparison, increased only 0.8% year on year in June. The widening gap between household spending and factory output is reshaping the country’s growth profile, with consumption providing stronger short-term momentum than manufacturing and other productive sectors.
Wages and credit strengthen household demand
Household expenditure is being supported by higher real earnings, pension increases, a stable dinar and rapidly expanding bank lending. The average net salary reached RSD118,398 in May. During the first five months of 2026, net earnings increased by 11.3% in nominal terms and 8.2% in real terms, strengthening household purchasing power.
The combination of wage growth, pension increases and credit expansion is supporting activity across retail, banking, residential development, telecommunications and consumer services. For industrial companies, however, the economic environment remains considerably less favourable. Export-oriented manufacturers are facing weaker European demand alongside higher labour costs, logistics constraints and increasing energy expenses.
Industrial costs rise faster than consumer prices
The difference between consumer inflation and producer costs is becoming an increasingly important factor for Serbian businesses. Consumer inflation stood at 2.7% in June, while industrial producer prices were 6.2% higher year on year in July. The gap indicates that companies are facing significantly stronger cost pressures than the headline consumer-price measure suggests. Businesses serving the domestic market may be able to pass some of those increases on to customers, while exporters and smaller suppliers generally have less pricing power.
Companies in food processing, metalworking, transport and construction-material production are particularly exposed to the combination of higher input costs and limited ability to raise selling prices. Where costs cannot be transferred to customers, the adjustment instead comes through lower margins.
Consumption growth increases import exposure
The composition of current growth also has implications for Serbia’s external accounts. Consumer-led expansion carries a relatively high import component because stronger household spending increases demand for vehicles, electronics, consumer products, fuel, travel and construction materials. A significant share of these goods and inputs must be sourced from abroad. Higher consumption can therefore increase GDP and tax revenues in the short term while simultaneously expanding the merchandise trade deficit and increasing reliance on foreign financing. The present growth pattern allows Serbia’s economy to maintain expansion of around 3% or slightly above during 2026 while wages, bank credit and public expenditure continue supporting domestic demand. The underlying imbalance is that household consumption is expanding faster than domestic productive capacity.
Industrial investment becomes increasingly important
The durability of Serbia’s growth will depend on whether stronger consumer demand is accompanied by increased industrial investment, development of domestic suppliers and expansion of export capacity. Without greater productive investment, rising household spending will continue to generate additional demand for imported goods rather than producing a comparable increase in Serbian industrial output.
The second-quarter growth estimate of 3.6% therefore comes against a mixed backdrop: household purchasing power and retail activity are expanding strongly, while industrial production remains constrained by weaker external demand and rising operating costs.
