The wiiw Spring 2026 forecast presents Serbia as an economy that entered 2026 with some visible signs of stabilisation, but whose recovery is now being disrupted by a fresh external shock. The report’s core message is that Serbia’s positive early-year indicators are unlikely to last because higher energy prices, weaker investor confidence and renewed global uncertainty are now feeding into domestic costs, FDI expectations and inflation. wiiw has therefore cut Serbia’s 2026 GDP growth forecast to 2.0% and raised its 2026 inflation forecast to 4.5%, while warning that a worse geopolitical scenario could push growth down to 1.0% and inflation close to 7.0%.
The starting point is already weak. Serbia’s GDP grew by only 2.2% in the fourth quarter of 2025, broadly matching the slow pace seen through the rest of the year. Early 2026 data looked somewhat better, but not enough to change the underlying picture. Industrial production fell by 5% year on year in January and February, although wiiw stresses that this was distorted by the temporary closure of NIS, linked to US sanctions and ownership issues involving Russia’s Gazpromneft. Once that effect is stripped out, the industrial picture looks less negative, especially because the automotive sector expanded by more than 50% in the first two months of the year, supported by electric vehicle production at the Fiat factory in Kragujevac.
The strongest domestic support remains household consumption. Retail trade rose by about 5% in real terms in January and February, supported by real wage growth of around 8% in January. That gives Serbia a consumption buffer that some neighbouring economies may lack. But the report also warns that this support will weaken as inflation rises again. Wage growth is still positive, but the purchasing-power effect will be smaller if fuel, energy and production costs feed into broader prices during 2026.
The labour market is already showing stress beneath the wage headline. Employment fell by around 2% year on year in the fourth quarter of 2025, with emigration accounting for almost half of the decline, while unemployment edged up to 8.9%. This is important because it suggests Serbia is not only facing a cyclical slowdown but also a structural labour constraint. The country can still generate wage growth, but it is doing so with a shrinking or shifting labour base, which may become a constraint for manufacturing, construction, infrastructure and energy projects.
Public investment is the main domestic growth engine. Infrastructure spending in January was roughly three times higher than in the same month of the previous year, reflecting continued public works, EXPO-related preparations and Serbia’s broader infrastructure push. But wiiw is clear that this will not be enough to offset the drag from weaker investment, higher costs and external uncertainty. Serbia’s model is therefore becoming increasingly dependent on public capital expenditure at a time when private and foreign capital are less certain.
The decisive weakness is foreign direct investment. FDI inflows fell by about one third in 2025, mainly due to a collapse in Chinese investment. This is one of the most important signals in the report. Serbia’s growth model has relied heavily on foreign manufacturing, infrastructure, mining, energy and industrial investment. If FDI does not recover in 2026, the economy loses one of its main engines. wiiw argues that the new Middle East conflict makes a strong rebound unlikely because global uncertainty is now higher and investors are less willing to commit capital into emerging European markets.
Inflation is the second major risk. Headline inflation slowed to about 2.5% in January and February, but this was helped by price controls introduced in autumn 2025. Those measures expired in March, meaning underlying price pressures are likely to reappear. Higher oil prices following the war in Iran add another cost shock. Serbia has responded by reducing excise duties on motor fuels and capping prices, keeping the increase in domestic fuel prices below 10%, but the report argues this will only soften the inflationary effect, not remove it.
For companies, the shock works mainly through production costs. Higher energy prices raise operating costs across manufacturing, logistics, construction, agriculture and services. This resembles the 2022 energy shock, although the domestic fuel cap should reduce the immediate pass-through. For households, the effect is milder because wages remain relatively strong, but even there the real-income cushion is expected to weaken.
Fiscal policy is not expected to provide a major rescue. wiiw expects the fiscal deficit at around 2% of GDP in 2026, broadly similar to recent years. No large support package has been announced beyond fuel-price intervention. Monetary policy is also constrained. The National Bank of Serbia has kept the key rate at 5.75%, and with inflation pressure rising again, rate cuts are unlikely in the near term. If inflation becomes more persistent, renewed tightening cannot be excluded.
The forecast table gives the clearest quantitative picture. Real GDP growth is projected at 2.0% in 2026, 3.0% in 2027 and 3.5% in 2028. Household consumption growth is expected to slow to 2.5% in 2026, while gross fixed capital formation is forecast to rise by only 2.0% after weak 0.8% growth in 2025. Industrial production is expected to recover to 3.0% growth in 2026, but the broader growth profile remains modest.
The external balance remains a pressure point. The current-account deficit is forecast to widen to €4.9bn in 2026, equal to 5.2% of GDP, before narrowing only slightly to 5.0% in 2027 and 4.7% in 2028. Goods exports are projected to grow from €32.5bn in 2025 to €34.7bn in 2026, but goods imports are forecast to rise faster in absolute terms, from €38.9bn to €41.9bn. That means Serbia remains structurally dependent on services exports, FDI inflows and external financing to cover the gap.
Debt indicators remain manageable but are moving in the wrong direction. General government debt is forecast to rise from 44.7% of GDP in 2025 to 46.0% in 2026 and 48.0% in 2027–2028. Gross external debt is forecast to increase from €51.1bn in 2025 to €56.6bn in 2026 and €67.5bn by 2028, reaching 62.0% of GDP. These are not crisis levels, but they show that weaker growth and higher external financing needs could gradually reduce Serbia’s policy space.
The political section adds another layer of uncertainty. wiiw describes Serbia as being in political limbo, with early parliamentary elections likely in autumn. The report notes that the ruling SNS won all ten municipalities in local elections on 29 March, but with weaker margins than before in most of them. It also argues that a student-backed list appears to be gaining political momentum, with a likely programme focused more on rule of law and political reform than on detailed economic policy.
The economic implication is that Serbia is entering a transition moment. The old model — strong FDI, public infrastructure, wage growth and managed macro stability — is still functioning, but with less force. FDI has weakened, public investment cannot carry the whole economy, inflation is returning, labour-market weakness is visible, and geopolitical shocks are hitting energy costs and investor confidence.
For banks and investors, the report’s message is direct: Serbia is not facing a macroeconomic crisis, but its risk premium is becoming more sensitive to external shocks, political uncertainty and the quality of investment inflows. The key variable for 2026 is no longer only GDP growth. It is whether Serbia can prevent a temporary shock from becoming a broader investment slowdown, especially if energy prices remain elevated and FDI fails to recover.
