Weakening domestic energy production is creating pressure across Serbia’s economy, affecting industrial activity, import requirements, foreign-exchange demand and inflation risks. The National Bank of Serbia (NBS) reported that energy-sector output contracted by 8.8% year on year in the second quarter of 2026 and by 4.2% in July-August.
Lower water levels also weighed on industrial activity by disrupting energy production and river transport. The central bank has identified a prolonged energy shock as one of the main upside risks to inflation.
Energy Imports Add Pressure to Foreign-Exchange Market
Reduced domestic energy production can increase dependence on imported supplies, while higher international fuel prices raise the cost of those purchases. Greater import requirements consequently increase demand for foreign currency and can put pressure on the dinar.
The NBS specifically attributed renewed depreciation pressure in the second half of September to increased foreign-currency demand from energy importers. In response, the central bank recorded net foreign-exchange sales of €380 million during September. Energy conditions therefore influence several parts of Serbia’s macroeconomic position simultaneously, including the trade balance, exchange-rate stability, industrial production costs and monetary policy.
Energy Costs Affect Industry and Monetary Policy
Unreliable or expensive electricity can weaken the competitiveness of manufacturing companies, even when other operating costs, such as wages and taxes, remain attractive. Higher energy prices can also increase inflationary pressure and complicate the central bank’s decisions on interest rates.
The NBS has warned that the risk of another prolonged fuel-price shock could limit the scope for monetary easing, even if underlying inflation indicators improve.
Low Water Levels Affect Power and River Transport
Hydrological conditions have added another source of pressure. According to the NBS, lower river levels affected industrial activity through reduced energy availability and disruptions to river transport.
These effects can occur simultaneously, as the same weather conditions that constrain hydropower production can also make freight movement along rivers more difficult. This creates overlapping risks for industrial companies and businesses dependent on regional transport routes.
Energy Infrastructure and Supply Diversification
Investment in the energy sector has implications beyond increasing electricity-generation capacity. Diversification of domestic supply, stronger transmission and distribution grids, energy storage, flexible generation and improved interconnections can all contribute to reducing exposure to external energy shocks.
The NBS presentation does not specify a preferred technology mix, but its assessment highlights the potential economic consequences of weaknesses in energy supply and infrastructure.
Serbia’s other macroeconomic indicators provide a contrasting picture, with moderate public debt, substantial foreign-exchange reserves, a healthy banking sector and growing exports. Energy remains a source of risk capable of affecting several of these areas through higher imports, inflationary pressure and exchange-rate movements. The availability of reliable energy at predictable prices is therefore closely linked to industrial operating conditions and the economy’s exposure to repeated increases in imports and inflation.
