Serbia has retained its BBB- investment-grade rating from S&P Global Ratings, while the agency has highlighted a larger fiscal deficit resulting from increased government spending and an extensive infrastructure investment programme. S&P maintained a stable outlook, leaving unchanged the rating Serbia first received from the agency in October 2024.
The agency reduced its forecast for Serbia’s 2026 economic growth to 3.2% from 3.3%. Meanwhile, an August budget revision raised the general government deficit target to 3.5% of GDP, compared with the previous target of 3.0%.
Higher spending absorbs fiscal headroom
According to S&P, Serbia’s strong fiscal performance during the first half of 2026 could otherwise have resulted in a full-year deficit of approximately 2.0%-2.5% of GDP. Additional government expenditure has used much of that available fiscal space, leaving the revised deficit target above the 3% of GDP ceiling incorporated into Serbia’s arrangement with the International Monetary Fund (IMF) for 2026.
The rating agency’s unchanged assessment indicates that Serbia continues to have sufficient economic, fiscal and external capacity to support its sovereign credit profile. Serbia entered 2026 with moderate public debt, substantial foreign-exchange reserves and a banking sector described by international institutions as well capitalised and liquid.
Infrastructure spending remains a key growth driver
Serbia’s real GDP increased by an average 3.5% year-on-year during the first half of 2026, with infrastructure investment and domestic demand continuing to support economic activity. The government is simultaneously financing major projects in transport, energy and Expo 2027-related infrastructure. Continued access to international debt markets and sovereign borrowing costs are therefore directly relevant to the financing of the investment programme.
The affirmation of the BBB- rating indicates that S&P has not materially changed its assessment of Serbia’s sovereign creditworthiness as a result of the current fiscal expansion. At the same time, the revised deficit target provides a reference point for subsequent fiscal policy. The increase above the IMF programme’s 3% of GDP ceiling means the fiscal trajectory following the 2026 spending increase will remain relevant to lenders and rating agencies.
Growth outlook faces energy and weather risks
S&P’s revised 3.2% growth forecast for 2026 remains above the 2% expansion recorded in 2025. Major infrastructure projects are continuing to support construction activity, investment and domestic demand. Serbia remains exposed to developments in energy prices, including the fiscal impact of government measures aimed at containing fuel costs. Such intervention reduces excise revenue, while uncertainty also remains around energy supply and the position of oil company NIS.
Agricultural and hydropower production remain vulnerable to weather conditions. These factors can affect public finances through weaker economic growth or revenue, while potentially increasing pressure for government support. The latest S&P assessment indicates that Serbia’s existing fiscal and external buffers remain sufficient to accommodate the current increase in spending without a change to the sovereign rating outlook.
