Serbia’s economy grew 3.8% year on year in the second quarter of 2026, but the composition of expansion shifted further toward services as industrial and energy production lost momentum. First-half GDP growth reached 3.5%, with services accounting for 1.9 percentage points of the second-quarter increase. Construction contributed 0.4 percentage points, while industry added 0.3 percentage points.
Services Continue to Drive Domestic Activity
The stronger performance of services became more visible in July. Retail turnover increased 8.2% year on year, while tourist arrivals rose 4.4%. Trade, tourism, transport and hospitality were among the activities supporting the service sector’s contribution to economic growth. The expansion of services provides support for employment, tax revenues and domestic consumption, while tourism and business services can also contribute to export revenues.
Industrial Production Declines in July
Industrial activity moved in the opposite direction. Industrial production decreased 2.3% year on year in July, with manufacturing output falling 1.6%. The largest decline came from the energy sector, where production contracted 8.8%. Mining was among the few major industrial segments to record growth, with output increasing 3%.
Several factors behind the industrial decline were sector-specific. Lower electricity generation reduced overall industrial output, while petroleum-products manufacturing was affected partly by low Danube water levels. Textile production also weakened.
Vehicle Manufacturing Remains Above Previous-Year Levels
Motor-vehicle production continued to stand substantially above the previous year despite a slowdown in its growth rate. Output in the sector increased 29.6%, with the pace of expansion moderated by a higher comparison base. The performance of manufacturing remains relevant to Serbia’s economic structure, which has developed around manufacturing-led foreign direct investment, goods exports and integration into European industrial supply chains. A prolonged weakening of manufacturing could affect industrial suppliers and export growth, while increasing the relative contribution of household consumption, construction and services to overall GDP.
Energy Output Remains a Key Industrial Factor
The 8.8% annual decline in energy production in July highlights the influence of electricity availability as well as hydrological and operational conditions on industrial performance. For manufacturers assessing investment, energy supply is an important consideration alongside labour availability, logistics and financing.
Serbia’s growth profile therefore combines solid overall GDP expansion with different trends across major sectors, with services accounting for a larger share of recent growth while parts of industry face weaker production conditions. The coming quarters will determine whether the July industrial decline remains temporary or develops into a wider divergence between the expanding domestic service economy and the industrial base. The performance of manufacturing will also shape the composition of growth as Serbia approaches the Expo-driven expansion, alongside continued activity in services, construction and consumption.
