Serbia’s public-debt indicators remain favorable compared with those of many European economies, but fiscal expenditure is rising faster than revenue. During the first five months of 2026, the general-government sector recorded a deficit of RSD 106.5 billion. Public revenue increased by 9.9% year-on-year, supported by social-security contributions, value-added tax and corporate-profit tax. Expenditure grew more rapidly, at 12.5%.
Higher wages and pensions accounted for part of the expenditure increase. Spending on goods, services and capital projects also rose. This composition reflects the government’s attempt to support household incomes while simultaneously maintaining a large infrastructure program.
The fiscal strategy envisages a deficit equivalent to 3% of GDP in both 2026 and 2027. The target is then expected to decline to 2.5% from 2028. These are manageable levels provided that economic growth remains solid, borrowing costs are contained and capital expenditure generates productive returns.
Public debt continues to follow a declining path relative to the size of the economy. At the end of May, central-government debt stood at 43.7% of projected GDP, while the broader general-government measure was 44%. The central-government ratio was 0.7 percentage points below its end-2025 level.
Debt management has also become more proactive. In May, Serbia issued €3 billion in Eurobonds across five-, ten- and twelve-year maturities, with coupon rates of 4.25%, 4.66% and 4.875%, respectively. Some €871 million of the proceeds was used to repay early a portion of Eurobonds otherwise due in 2027. This reduced near-term refinancing concentration and extended the maturity profile.
A declining debt-to-GDP ratio should not, however, be interpreted as unlimited fiscal space. The ratio can fall when nominal GDP grows rapidly even if the government continues to run deficits. Its future direction will therefore depend on economic growth, inflation, interest costs, exchange-rate movements and the size of new borrowing.
The quality of expenditure is equally important. Borrowing for transport, utilities and other projects that raise productive capacity can strengthen the future revenue base. Projects with weak economic returns may increase maintenance costs without producing a corresponding improvement in productivity.
Serbia’s fiscal position is not currently defined by an excessive debt stock. Its challenge is to ensure that a period of comparatively favorable debt dynamics is used to improve the structure of public finances. Maintaining a buffer below higher-risk debt thresholds will become particularly valuable if global borrowing costs, energy prices or external demand move in an unfavorable direction.
