Serbia’s fiscal policy has shifted toward a moderately expansionary stance in 2026, with higher wages, pensions, capital investment and household-support measures increasing public spending while general-government debt remains at 44.1% of projected GDP.
According to the National Bank of Serbia, the general-government deficit was approximately 1% of GDP in the first half of 2026, while the primary balance remained positive at around 0.6% of GDP. Real public-sector revenue increased 8.6% year on year, supported mainly by wage-related taxes and VAT as private consumption expanded.
Revenue growth follows higher wages and corporate profits
Corporate profitability has also strengthened the government’s revenue base. Company profits in 2025 were approximately 11% higher than in 2024, supporting corporate tax receipts during 2026. Higher wages and household consumption have simultaneously increased collections from payroll-related taxes and VAT.
Public expenditure, however, has expanded at a faster rate. Real government spending increased 10.1% in the first half, with public-sector wages and pensions among the main drivers. Capital expenditure also increased, alongside procurement of goods and services, subsidies and other current expenditure. The NBS describes the resulting fiscal impulse as moderately expansionary, rather than as a deterioration in fiscal control. Some measures supporting consumption are temporary, while lower excise duties on petroleum products were introduced to offset part of the international energy-price shock.
Fiscal support coincides with restrictive monetary conditions
The more supportive fiscal stance is developing alongside cautious monetary policy. The NBS has maintained its key interest rate at 5.75%, while headline inflation is expected to rise above 4% and domestic bank lending is expanding by 16.6% year on year. Fiscal spending and rapid credit growth are therefore supporting domestic demand while monetary policy remains restrictive.
Public debt provides the government with additional fiscal capacity. General-government debt stands at 44.1% of GDP, below the Maastricht reference value. Serbia’s reserve position and access to international capital markets also contribute to its financing capacity.
Eurobond issuance strengthens refinancing position
Serbia raised approximately €3 billion equivalent through three Eurobond transactions in April, with maturities of five, 10 and 12 years. Investor demand exceeded €8 billion. The euro-denominated bonds carried coupon rates of 4.25%, 4.66% and 4.875%, respectively, with the 12-year issue receiving a green designation.
The proceeds were not used entirely for additional government spending. The five-year bond financed the early repurchase of debt scheduled to mature in 2027. Other capital-market transactions involving Serbian companies were also used to repay financial loans, reducing refinancing concentration even as overall bond issuance increased.
Expo programme raises public investment requirements
The fiscal outlook is closely linked to Serbia’s €19.561 billion Expo-era capital programme, which includes road, railway, municipal and other infrastructure investments scheduled over several years. The programme is expected to increase public investment and support construction activity, while also placing greater demands on implementation capacity and medium-term expenditure management.
The NBS expects the investment cycle to contribute to economic growth of 4.5% in 2027. Higher nominal GDP can improve the debt ratio by increasing the size of the GDP denominator, although the impact depends on the productive capacity generated by the investment programme. Construction costs are already adding pressure to infrastructure budgets. Prices of construction materials and components were 10.8% higher year on year in June, potentially reducing the real volume of infrastructure that can be delivered within a fixed nominal allocation.
Wage and pension spending supports household demand
The composition of government expenditure remains important for its medium-term economic impact. Infrastructure spending on transport, energy and other productive public assets has different implications from recurring transfers. The NBS does not provide project-level fiscal multipliers or rates of return, but identifies capital investment as an important factor behind its 2026-27 growth outlook.
Household income is another channel through which fiscal policy is supporting demand. Public-sector wages increased 11.8% year on year in April-May, compared with 10.2% growth in private-sector wages. Pension expenditure is also increasing. Higher public-sector incomes and pension payments support household purchasing power and consumption, while simultaneously strengthening tax revenues, although stronger labour-cost growth can contribute to service-price pressures when labour markets remain tight. The NBS currently assesses the fiscal position as manageable, with inflation expectations anchored, public debt at a relatively moderate level and economic growth expected to accelerate during the investment cycle.
The 0.6% of GDP primary surplus recorded in the first half also indicates that the fiscal accounts retained underlying strength despite the overall deficit. As Expo-related construction moves toward its peak, the fiscal position will be tested by the scale of infrastructure spending. Serbia is entering that investment phase with public debt at approximately 44% of GDP, while the government is simultaneously increasing expenditure on capital projects, wages, pensions and measures addressing energy costs.
