Serbia’s energy sector recorded another decline in production during the first seven months of 2026, reducing its contribution to industrial activity and weakening the country’s energy trade position. Output in electricity, gas, steam and air conditioning fell 4.8% year on year in January-July and 8.8% in July, according to the September edition of the Macroeconomic Analyses and Trends bulletin. The sector represents almost 15% of Serbia’s industrial production and was the only major economic sector estimated to have contracted during the first seven months.
Energy Trade Position Deteriorates
The decline in domestic energy output was reflected in external trade. Energy exports fell by €268.8 million compared with a year earlier, while imports increased by €82.4 million. The deterioration in the energy trade balance was therefore driven primarily by lower exports rather than an exceptional increase in purchases from abroad.
Hydropower generation was 6.9% higher than during the weak comparable period in 2025, but remained 14.6% below its long-term average. Preliminary information cited by MAT indicated a further year-on-year deterioration in August. The sector’s longer-term production trend also remained weak. In July, output was still around 2% below the 2025 average, despite the recovery that had begun in the spring.
Energy Constraints Affect Industrial Activity
Lower domestic electricity generation affects the wider economy through both trade and supply costs. Reduced electricity exports weaken the trade balance, while greater reliance on regional electricity purchases can increase costs for suppliers and industrial consumers when demand is high. The weaker energy position also coincides with the European Union’s Carbon Border Adjustment Mechanism (CBAM) entering its definitive phase.
Electricity sold into the EU is subject to carbon-related reporting and verification requirements, while Serbian manufacturers increasingly need stronger evidence concerning the electricity embedded in CBAM-covered goods. New investment in wind, solar, energy storage and grid capacity could strengthen Serbia’s longer-term energy balance, although project pipelines cannot immediately replace weaker hydropower or thermal generation.
