Serbia’s headline inflation rate may have eased, but the country’s corporate sector is not yet convinced that the cost shock has passed. Companies are preparing for another rise in raw-material, energy and production expenses, while fewer businesses expect output and turnover to increase during the remainder of the summer.
Consumer prices rose 2.7 per cent year on year in June, down from 3.5 per cent in May, and increased by only 0.2 per cent month on month. Yet the latest inflation-expectations survey conducted for the National Bank of Serbia points to a widening gap between the official inflation measure and the pressures companies encounter in their procurement contracts, logistics bills and production accounts.
The share of businesses expecting input prices and production costs to increase during the next three months rose to 35 per cent in June, from 26 per cent in May. Over a 12-month horizon, 47 per cent expect higher input prices, compared with 39 per cent a month earlier.
The change is significant because it occurred while measured consumer inflation was falling. It suggests that companies are not treating June’s lower inflation rate as evidence of a durable improvement in the cost environment. Instead, many appear to see the slowdown as a temporary statistical reprieve that may not survive the next round of commodity purchases, electricity settlements, wage negotiations and transport-price adjustments.
The corporate response is already visible in companies’ pricing intentions. The proportion of businesses reporting higher selling prices remained at 39 per cent in June, while the share expecting to raise their output prices during the next 12 months increased from 53 per cent to 55 per cent. More than half of the surveyed corporate sector is therefore preparing either to pass at least part of the higher cost base to customers or to protect margins through selective price increases.
That does not necessarily point to a return to the inflation rates seen during the earlier energy and food-price shock. It does, however, reveal persistent inflation below the headline number. Serbian manufacturers, construction companies, food processors, transport operators and retailers purchase different baskets of inputs from those measured by the consumer price index. Their exposure includes imported intermediate goods, metals, chemicals, packaging, machinery components, fuels, electricity, freight and labour. Prices in these categories can move sharply even when average household inflation is moderating.
The divergence is particularly relevant for Serbia’s industrial supply chains. A substantial part of the manufacturing base is integrated into European automotive, electrical-equipment, machinery, metals and consumer-goods networks. Exporters may face weaker demand from core European markets at the same time as imported inputs become more expensive. That combination restricts their ability to transfer costs to customers and turns inflation into a margin problem rather than simply a pricing problem.
Companies operating under annual framework agreements or fixed-price export contracts carry the greatest exposure. When wages, energy or raw-material expenses increase faster than contract prices can be renegotiated, EBITDA margins absorb the difference. Larger manufacturers can partly manage this through purchasing contracts, currency hedging, energy procurement and supplier diversification. Smaller companies generally have fewer options and are more dependent on working-capital financing at prevailing bank rates.
The weakening of near-term business expectations reinforces the concern. The proportion of companies expecting their production or turnover to increase over the next three months fell from 41 per cent in May to 33 per cent in June. As many as 64 per cent expect no change, leaving only a relatively narrow group anticipating a meaningful short-term expansion.
Expectations are more constructive over a full year, with 48 per cent of companies forecasting higher production or turnover. Even so, 51 per cent expect business volumes to remain unchanged. The corporate sector is therefore not signalling a broad contraction, but neither is it describing an economy entering a strong private-sector investment and production cycle.
The shift is consistent with mixed industrial data. Serbia’s industrial production increased by only 0.3 per cent year on year in May, indicating that activity remained broadly flat after a volatile opening to the year. The latest corporate expectations suggest that companies do not yet see sufficient order-book momentum to offset the renewed pressure on operating costs.
Earlier data from the Serbian Chamber of Commerce had already exposed this fragility. In the first quarter, 41 per cent of surveyed companies reported lower turnover than in the final quarter of 2025, with an average decline of 27 per cent among those experiencing a fall. Only 19 per cent recorded growth, although those companies achieved a relatively strong average increase of 24 per cent. The result was a sharply divided corporate economy in which a smaller group of expanding businesses coexisted with a much larger segment facing stagnant or declining sales.
The June survey indicates that the optimism recorded earlier in the year has become more cautious. Infrastructure expenditure linked to Expo 2027, public construction and investment in transport and energy assets continues to support selected sectors. Production of electric vehicles and renewed activity in oil processing can also lift headline output. These projects, however, do not automatically translate into uniform demand across small and medium-sized companies, particularly those dependent on household consumption or subdued European industrial orders.
Corporate inflation expectations illustrate the underlying tension. Businesses expect inflation of 5 per cent over the next year, unchanged for the third consecutive month and broadly consistent with the level recorded since the beginning of 2025. Their expectations for inflation two and three years ahead also remain at 5 per cent.
This persistence matters more than a single monthly inflation result. When companies believe that prices will continue increasing at approximately 5 per cent, they incorporate that assumption into wage negotiations, supplier contracts, investment appraisals and sales-price decisions. Inflation expectations can therefore sustain cost growth even after the initial external shock has weakened.
The contrast with the financial sector is pronounced. Banks and financial institutions reduced their one-year inflation expectation from 4 per cent in May to 3.6 per cent in June, while medium-term expectations stood at 3.5 per cent for two years ahead and 3 per cent for three years ahead. Financial institutions are therefore broadly aligned with the central bank’s inflation objective, while companies remain more sceptical.
Households occupy a third and still more cautious position. Their one-year inflation expectations declined sharply from 15 per cent to 10 per cent, the lowest level since June 2024, but remain far above both observed inflation and the expectations of businesses and banks. Medium-term household expectations also stayed at 10 per cent.
These three readings describe different parts of the Serbian economy. Financial institutions are focused on monetary conditions and the central bank’s policy framework. Companies are responding to actual supplier quotations, payroll expenses and financing costs. Households are influenced by food, utilities, housing and other frequently purchased items, as well as by the cumulative rise in prices over previous years.
For the National Bank of Serbia, the corporate survey supports a cautious monetary stance. The central bank kept its reference rate at 5.75 per cent in July, unchanged throughout the first seven months of 2026. With consumer inflation inside the target band but corporate expectations fixed at 5 per cent, an early reduction in borrowing costs could risk reinforcing price-setting behaviour before underlying pressures have clearly subsided.
The result is a difficult financing environment for companies. Nominal interest rates remain elevated relative to the subdued growth in industrial production. Businesses must finance inventories and receivables while carrying raw-material stocks purchased at uncertain prices. Companies with limited cash reserves may reduce inventories, postpone capital expenditure or shorten payment terms, potentially transmitting liquidity stress through domestic supply chains.
The stable dinar provides some protection by limiting the local-currency impact of euro-denominated imports and debt. It cannot, however, eliminate movements in global commodity prices or supplier charges. Serbian businesses also remain exposed to transport disruptions, energy-market volatility and price changes in European industrial inputs. Exporters face the additional problem of attempting to recover higher costs from customers operating in markets where demand remains relatively weak.
Investment decisions are consequently becoming more selective. Projects that reduce electricity consumption, automate labour-intensive processes, improve material efficiency or replace imported inputs can still produce attractive returns. Conventional capacity expansion becomes more difficult to justify when only one-third of companies anticipate near-term growth and almost half expect further input-price increases.
The pressure will not be evenly distributed. Food processing and agriculture remain sensitive to weather, fertiliser, fuel and packaging costs. Construction companies face labour shortages, material-price movements and fixed-price contractual exposure. Metals and chemicals producers carry heavy energy and commodity risks. Retailers have greater ability to adjust prices but face resistance from consumers whose inflation expectations remain high. Export manufacturers may have more predictable volumes, yet their pricing power is constrained by multinational buyers and European supply-chain competition.
The dominant corporate view remains one of stability rather than crisis: three-quarters of companies said business conditions had not changed during the previous three months, and 71 per cent expect no change during the coming year. Stability, however, has acquired a defensive character. It describes an economy in which companies are maintaining activity while protecting cash flow and margins, rather than one in which falling inflation is rapidly unlocking new investment.
Serbia’s June inflation number offers relief to households and gives the central bank evidence that price growth remains within its target range. The corporate data carry a less comfortable message. Businesses are entering the second half of 2026 with weaker short-term growth expectations, persistent 5 per cent inflation assumptions and a renewed expectation that raw materials and operating expenses will become more expensive. The next phase of Serbia’s inflation cycle will be determined less by the headline index than by whether companies can absorb those costs without cutting investment, employment or production—or transferring them back into consumer prices.
