Serbia’s economy expanded at a faster pace in early 2026, with real GDP growth reaching 3.2% year on year in the first quarter, compared with 2.2% in the final quarter of 2025 and 1.8% in the first quarter of 2025.
The acceleration represents a stronger start after economic growth remained close to 2% during most of 2025. However, available indicators show that the recovery has been increasingly supported by household consumption, wage growth and credit expansion, while fixed investment and industrial activity have not accelerated at the same pace.
Household spending and credit support economic activity
Household borrowing has become one of the main drivers of domestic demand. Bank claims on households increased by approximately 20% year on year by June 2026, while real retail turnover grew by around 6% annually in May. Consumer resilience has also been supported by continued wage increases. Average net salaries recorded double-digit nominal growth, strengthening household purchasing power and supporting spending across retail, services and other consumer-oriented sectors.
This pattern has created stronger activity for banks, retailers, telecommunications companies, hospitality providers, property-related businesses and public revenues. However, consumption-driven expansion generally contributes less to future production capacity than investment-led growth and can carry a higher import component.
Construction and industry show mixed performance
Investment indicators have remained weaker. The first-quarter index measuring the value of completed construction works stood at 68.6, compared with 70.1 a year earlier, and remained significantly below the seasonal highs recorded during the final quarters of 2024 and 2025. Industrial activity has also developed unevenly. Manufacturing recorded stronger performance, while mining and electricity production remained weak, limiting the overall contribution of industrial output to economic growth.
The difference between stronger consumption and weaker construction activity indicates that the recovery has not yet been accompanied by a broad expansion in productive capacity.
External balance remains supported despite stronger demand
Serbia’s external position improved during the first five months of 2026, with the current-account deficit narrowing substantially. The improvement shows that stronger economic growth has not yet created an unsustainable external imbalance. Continued rapid growth in household lending could increase demand for imported consumer goods, including vehicles, household appliances, electronics and other products.
The government remains an important source of investment demand through infrastructure projects in transport, energy and urban development. The economic impact of these investments depends on the speed of execution, as announced capital spending contributes to growth only after procurement, construction activity and payments advance.
Financing conditions limit private investment expansion
Private-sector investment continues to face higher financing costs. Corporate borrowing in dinars remains considerably more expensive than euro-linked financing, increasing the cost of long-term projects. Construction delays and permitting uncertainty also raise the effective cost of investment by extending project timelines and increasing financing expenses.
For Serbia’s economy, projects that reduce import dependence or strengthen export capacity remain particularly important. Investments in electricity generation, grid infrastructure, energy storage, industrial modernisation, logistics systems and environmental infrastructure can contribute more directly to long-term growth when they are technically prepared and financially sustainable. The 3.2% first-quarter GDP growth rate confirms a stronger recovery phase, but future performance will depend on whether investment and production capacity begin expanding alongside household consumption and credit growth.
