Serbia’s economic expansion strengthened in the second quarter of 2026, with faster output growth and improved prospects for agriculture supporting the National Bank of Serbia’s assessment of the year ahead. At the same time, the pace of construction is raising questions about how much of the current investment cycle will translate into lasting economic activity.
Real GDP grew 3.8% year on year in the second quarter of 2026, compared with 3.2% in the first quarter, according to the statistical office. Seasonally adjusted output increased 1.5% from the previous quarter. The National Bank of Serbia, in its September assessment, said risks to its 3.2% growth forecast for 2026 had shifted upward following stronger-than-expected second-quarter activity and improved agricultural prospects. For 2027, the central bank forecasts 4.5% growth, with the international EXPO exhibition expected to contribute to the acceleration.
Construction Leads the Investment Cycle
The latest national accounts show that construction value added rose 9.1% in the second quarter, while gross fixed investment increased 3.3%. The two indicators measure different elements of economic activity and are not directly interchangeable. Their differing growth rates, however, highlight the importance of examining the composition and future use of capital being created during the current expansion. Construction generates demand for labour, materials and professional services while projects are being delivered. The longer-term economic return depends on whether completed assets subsequently support productive activity and generate sufficient income.
Transport infrastructure can shorten delivery times and improve access to customers, while commercial facilities can provide space for businesses and services. Event-related infrastructure can also support future economic activity where sustained demand and a viable operating model exist. The economic return is more limited when utilisation remains below expectations or when operating and maintenance costs outweigh the productivity and income generated by an asset.
Businesses Face Different Investment Tests
For private companies, the distinction between temporary and recurring demand is important when evaluating expansion opportunities. A contract connected to a construction programme can provide attractive business activity even when demand is temporary, provided companies understand its duration and associated risks. Expanding permanently on the assumption that the same demand will continue requires a different assessment.
Purchases of equipment, additional premises and long-term hiring need to be considered against conditions after the initial project is completed. Companies must assess whether capacity can serve other customers or be redeployed once the existing order cycle ends. This consideration is particularly relevant to hospitality, transport, events and related services. A major international gathering can increase demand, but attendance during an event does not by itself establish a year-round market for additional capacity. Operators therefore need to consider their post-event customer base, operating costs and competitive position when determining whether temporary demand can support permanent capacity.
Public Assets Also Require Long-Term Planning
The same considerations apply to public investment. Future operating and maintenance expenses need to be assessed alongside the initial construction cost. An infrastructure or other public asset can be completed on schedule while still creating a financial burden if its future use and funding are not sufficiently established. Serbia’s external position provides additional support for the broader economic outlook. The current-account deficit narrowed to €1.9 billion in January–July, while foreign-exchange reserves reached €30.8 billion at the end of August, according to the National Bank of Serbia. These buffers can strengthen resilience to external shocks, but they do not replace the need for sustainable export and service revenues. External reserves can absorb disruptions, while competitive production remains necessary to generate recurring external income.
Household Demand Adds to Economic Activity
Domestic consumption is also contributing to growth. Household consumption increased 4% in real terms in the second quarter, supporting retailers and service providers while also generating demand for imported products. A key factor for the domestic economy is the extent to which stronger consumption is matched by local production and service capacity. Serbian companies able to meet additional demand competitively can retain a larger share of the resulting economic activity domestically. Where domestic capacity or product availability is insufficient, imports take a greater share of the additional demand.
Services Can Extend the Investment Effect
Professional and technical services provide another potential channel through which the current investment cycle can build longer-term business capacity. Engineering, project management, maintenance and specialised business services can gain experience through ongoing projects and subsequently apply those capabilities to other customers and programmes.
For that benefit to persist, companies need to retain skilled employees and develop customer relationships beyond the initial investment programme. The longer-term value comes from the capabilities developed through current work rather than solely from the temporary increase in revenues. The key issue for Serbia’s growth outlook is therefore not only whether economic activity eventually slows, but also whether the current expansion produces sufficient improvements in productivity and recurring revenue to support subsequent growth.
Relevant indicators will include utilisation of completed infrastructure, performance of new facilities, private investment following public projects and the ability of domestic suppliers to secure repeat contracts. Serbia is entering the final part of 2026 with a stronger growth outlook than its earlier forecast indicated. The longer-term economic impact will become clearer as construction programmes are completed and newly created assets begin operating under normal market conditions.
