Serbia’s economy accelerated more strongly than expected in the second quarter of 2026, supported by exports, household consumption and lower inflation, but the latest official data reveal a less comfortable picture beneath the headline growth rate. Industrial production remains almost stagnant, registered employment has declined, foreign direct investment is running below its recent historical levels and the external financing mix has shifted decisively towards portfolio capital.
The Statistical Office of the Republic of Serbia estimates that real GDP increased by 3.6 per cent year on year in the second quarter of 2026, an improvement from the 2 per cent growth recorded for 2025 and above the Ministry of Finance’s current 3 per cent full-year projection. The detailed national-accounts breakdown will not be available until the end of August, but the accompanying trade, industrial, wage, retail and balance-of-payments data already indicate where the acceleration is coming from.
Serbia is benefiting from a combination of stronger merchandise exports, a sharply narrower current-account deficit and continued real-income growth. These trends are supporting economic activity without creating immediate inflation or exchange-rate pressure. At the same time, however, industrial output increased by only 0.7 per cent in the first half of 2026, while household credit and retail consumption expanded much faster. The economy is growing, but it is not yet entering a broad industrial-investment cycle.
The Ministry of Finance estimates that nominal GDP will reach approximately RSD11.07tn in 2026, compared with RSD10.39tn in 2025 and RSD9.75tn in 2024. The projected nominal increase of around 6.5 per cent combines the official real-growth assumption with a much more moderate price component than Serbia experienced during the energy and food inflation shock.
GDP reached approximately €88.7bn in 2025, while GDP per capita increased to about €13,545, from €12,641 in 2024. Continued dinar stability means that nominal growth is translating directly into higher euro-denominated output rather than being diluted by exchange-rate depreciation. On the Ministry’s dinar projection and the prevailing exchange rate, Serbia’s economy could approach €94bn–€95bn in 2026.
The latest quarterly reading suggests that the Ministry’s growth forecast is achievable and potentially conservative. Maintaining the current pace for the remainder of the year would place full-year expansion above 3 per cent, although agricultural production, electricity generation, construction execution and European industrial demand will shape the final outcome. Serbia remains exposed to drought, hydrological volatility and the performance of its energy system, all of which can produce significant swings in quarterly GDP.
Trade has become the clearest positive contributor. Merchandise exports reached €17.97bn in January–June 2026, increasing by 8.3 per cent from the corresponding period of 2025. Imports rose by a more restrained 3.7 per cent to €21.68bn. Total trade was worth €39.65bn, an increase of 5.8 per cent in euro terms.
The goods deficit consequently narrowed by 14.1 per cent to €3.71bn. Export coverage of imports improved from 79.4 per cent to 82.9 per cent. This represents a meaningful external adjustment for an economy that imports large volumes of energy, machinery, electrical equipment, components and consumer products.
The June data reinforce the pattern already visible in the Ministry’s January–May table. Export growth is outpacing imports by a sufficiently wide margin to reduce Serbia’s external financing requirement, even as domestic consumption continues to expand. The adjustment has not been achieved through a recessionary collapse in imports; the country is still buying substantial volumes of intermediate and capital goods.
During the first five months, intermediate-goods imports amounted to €6.12bn, while capital-goods imports reached €3.31bn. Together, the two categories represented approximately 53 per cent of total imports. This composition indicates continued production and investment activity, although the pace and destination of capital spending remain uneven.
The European Union remains Serbia’s dominant economic partner. EU member states accounted for 58.7 per cent of total Serbian trade in the first half. EU-bound exports had already reached €9.27bn by May, representing approximately 63 per cent of goods exports at that point in the year.
Serbia also maintained a strong position in the Central European Free Trade Agreement market. Exports to CEFTA countries reached €2.37bn, against imports of €782mn, producing a surplus of approximately €1.59bn and an export-to-import ratio of more than 300 per cent. Cereals, beverages, vehicles, pharmaceuticals and electrical equipment were among the principal contributors.
CEFTA remains particularly valuable because Serbia records a structural surplus there, partially offsetting its deficit with the EU, China and other large suppliers. The regional market also provides a commercial base for Serbian manufacturers whose scale, certification or cost structure may not yet support direct competition in more demanding EU markets.
The export figures nevertheless conceal significant differences between industrial sectors. Manufacturing production increased by 1.8 per cent in the first half, while total industrial output grew only 0.7 per cent. The June result was stronger, with manufacturing up 2.8 per cent year on year, but seasonally adjusted manufacturing output declined 1.3 per cent from May.
Capital-goods production increased by 11.3 per cent in January–June, providing the most encouraging industrial signal. Production of intermediate goods excluding energy rose by 2.4 per cent. These increases suggest that parts of the machinery, equipment, automotive and supplier base are responding to stronger export demand.
Other sectors remain under pressure. Energy output declined 3.6 per cent in the first half, while electricity, gas, steam and air-conditioning production fell 10.4 per cent year on year in June. Mining output decreased by 0.6 per cent over the first half, although metal-ore extraction increased by 2.9 per cent.
Basic-metals production was 11.7 per cent lower, while fabricated-metal production declined 8 per cent. Computer, electronic and optical products fell almost 20 per cent, clothing production dropped 11.6 per cent, and durable consumer goods were down 13.2 per cent.
The weakness in basic metals is commercially important because Serbia’s steel, copper and downstream metal industries are among its most significant exporters, electricity consumers and sources of industrial employment. These sectors are also entering a more demanding regulatory period as the EU Carbon Border Adjustment Mechanism begins to influence importer procurement, emissions reporting and product pricing.
Serbian producers will increasingly compete not only on production cost but also on verified embedded emissions, electricity sourcing and the quality of plant-level monitoring data. A stable exchange rate removes the possibility of using dinar depreciation as an easy response to higher wages, energy costs or carbon-compliance expenditure. Productivity improvements and lower-carbon electricity must carry more of the competitive adjustment.
The energy decline also has wider implications for the growth model. Lower domestic electricity production increases the risk of imports during high-price periods, placing pressure on the trade balance and the operating position of Elektroprivreda Srbije. Serbia’s ability to sustain faster industrial growth depends increasingly on transmission investment, rehabilitation of the existing thermal and hydropower fleet, renewable integration, storage and new balancing capacity.
The external accounts have improved more rapidly than trade data alone suggest. The current-account deficit was €560.6mn in January–May 2026, a reduction of 68.9 per cent from the corresponding period of 2025. The improvement was broad-based: the goods deficit declined by 21.7 per cent, the services surplus increased by 30.4 per cent, the secondary-income surplus rose 15 per cent, and the primary-income deficit fell by 1.4 per cent.
In May alone, the current-account deficit was €124.8mn, approximately €340mn smaller than a year earlier. Serbia is therefore entering the second half with a far lower external funding requirement than appeared likely at the beginning of the year.
Services generated a surplus of approximately €1.21bn during January–May, compared with around €925mn in the same period of 2025. Information technology, transport, professional services and tourism continue to provide a counterweight to the merchandise deficit. The secondary-income account, supported heavily by remittances, recorded a surplus of approximately €2.34bn.
The financing side is less reassuring. The National Bank of Serbia reported €893mn of FDI inflows into Serbia during January–May, while the net direct-investment balance used in different statistical presentations is lower after Serbian investment abroad and other financial-account adjustments are included. The Ministry’s earlier table showed €357mn of net FDI in January–April, illustrating the importance of distinguishing gross inward flows, net liabilities and the full net direct-investment position.
Whichever definition is applied, foreign direct investment has slowed from the exceptional levels recorded earlier in the decade. Net FDI fell from approximately €4.6bn in 2024 to €2.28bn in 2025. The 2025 total was barely half the previous year’s figure and represented around 2.6 per cent of GDP, compared with 5.5 per cent in 2024.
More strikingly, Serbia recorded approximately €3.7bn of net portfolio inflows during the first five months of 2026, while the financial account excluding reserve changes showed a net inflow of around €1bn after other movements were included. Portfolio capital has therefore overtaken FDI as the principal source of new external financing.
The shift is partly connected with Serbia’s international bond issuance and the government’s pre-financing of infrastructure and budgetary requirements. It strengthens near-term liquidity and supports foreign-exchange reserves, but portfolio inflows are fundamentally different from investment in factories, mines, logistics centres, energy assets or technology operations. They increase the stock of market-sensitive financial liabilities and must eventually be refinanced or repaid.
For Serbia’s sovereign-risk profile, the distinction matters. FDI is generally stable, long-term and linked to productive assets, while portfolio flows are more sensitive to global interest rates, geopolitical risk, credit ratings and emerging-market sentiment. The current-account deficit is now small enough to be covered comfortably, but the quality of that coverage has weakened.
Serbia’s reserve position remains a powerful buffer. Gross foreign-exchange reserves stood at approximately €29.6bn in June, close to their recent record level. This was sufficient to cover slightly less than seven months of goods and services imports and around 164 per cent of the M1 money supply, comfortably above conventional reserve-adequacy thresholds.
The National Bank held 54.6 tonnes of gold, more than three times the volume recorded in 2012. Gold represented just under 21 per cent of total reserves, reducing exposure to individual reserve currencies and providing additional protection against geopolitical and market shocks.
The dinar weakened by only about 0.1 per cent against the euro during the first half. The NBS sold €755mn net on the interbank foreign-exchange market during the period, although it purchased €405mn in June as appreciation pressures returned. The intervention pattern shows that exchange-rate stability is actively managed rather than purely market-driven, but the reserve stock gives the central bank sufficient capacity to continue that policy.
Inflation reached 2.7 per cent in June, remaining within the NBS target corridor of 3 per cent plus or minus 1.5 percentage points. Average inflation was 2.9 per cent in January–May, compared with 3.8 per cent in 2025 and 4.6 per cent in 2024. The disinflation process has allowed wages and pensions to grow strongly in real terms without an immediate tightening of monetary conditions.
Average net salaries reached RSD118,398 in May, while the January–May average was around RSD119,500. Net wages increased 11.3 per cent nominally and 8.2 per cent in real terms from the corresponding period of 2025.
The median net wage was much lower at RSD93,277, meaning that half of employees earned less than that amount. The gap of more than RSD25,000 between the median and average shows that salary growth remains unevenly distributed, with higher-paid technology, finance, public-enterprise and specialist roles pulling the average above the income received by a typical worker.
Pensions also recorded strong real growth, reaching an average of approximately RSD56,847. Together with higher wages and retail lending, this has supported consumption. Retail turnover increased 4.3 per cent in real terms in June, following real growth of 6.2 per cent in May.
Bank lending confirms the household-led nature of the expansion. Household credit increased from RSD1.94tn at the end of 2025 to RSD2.08tn by May 2026, a rise of 7.2 per cent in five months. Corporate credit increased by only 0.8 per cent, from RSD2tn to RSD2.01tn.
Households now account for approximately 50.9 per cent of combined lending to companies and individuals. Total domestic credit expanded by around 4 per cent, but the growth was concentrated in consumer, cash and housing-related lending rather than productive corporate investment.
Registered employment also weakened. Serbia had approximately 2.356mn registered workers in the second quarter, around 14,163 fewer than a year earlier. The ILO unemployment rate was 8.9 per cent in the first quarter, compared with a 2025 four-quarter average of 8.7 per cent. Economic growth is no longer producing broad employment gains, partly because of labour shortages, demographic decline, automation and the changing sectoral composition of investment.
The fiscal position provides room to manage these imbalances, but expenditure commitments are increasing. General government debt declined to approximately 44.7 per cent of GDP in 2025, from 46.9 per cent in 2024 and a peak of more than 68 per cent in 2015. The government enters the EXPO 2027 investment cycle with a considerably stronger debt ratio than during previous infrastructure expansions.
The fiscal deficit nevertheless widened from about 2 per cent of GDP in 2024 to 2.4 per cent in 2025, while the revised fiscal framework allows a deficit of around 3 per cent in 2026. Consolidated expenditure reached 43.36 per cent of GDP in 2025, compared with revenue of 40.93 per cent. The primary deficit was approximately 0.76 per cent of GDP.
Serbia’s interest burden was equivalent to roughly 1.64 per cent of GDP, or around RSD171bn, in 2025. With inflation moderating, future debt-ratio reductions will depend more heavily on real growth and primary fiscal discipline. Nominal GDP expansion will provide less automatic assistance than it did during the high-inflation period.
The latest official data therefore present an economy with substantial defensive strength but an increasingly uneven growth structure. GDP is expanding by 3.6 per cent, exports are growing more than twice as quickly as imports, the current-account deficit has fallen almost 69 per cent, inflation is contained and reserves remain close to €30bn.
At the same time, total industrial production is up only 0.7 per cent, energy output is falling, basic metals are contracting, registered employment has declined and corporate credit is almost flat. Consumption, household borrowing and portfolio inflows are doing more of the work previously associated with new factories, foreign direct investment and broad industrial expansion.
Serbia’s macroeconomic buffers are sufficiently strong to support the current growth cycle. Its next phase will depend on converting fiscal spending and external financing into transmission infrastructure, reliable domestic energy, productive industrial capacity and export operations capable of meeting the EU’s increasingly demanding carbon and supply-chain standards.
