Serbia’s construction market opened 2026 with a sharp divide between buildings and infrastructure. The nominal value of works performed by Serbian contractors increased 0.5% in the first quarter, but construction activity fell 6.2% in real terms once price effects were removed.
The building segment expanded strongly. Real construction work on buildings increased 22.3% year on year, while civil-engineering activity fell 21.8%. The figures show that residential, commercial and other building projects are supporting the sector while roads, railways, utilities, energy infrastructure and other engineering works remain under pressure.
For work carried out within Serbia, total activity fell around 5% in constant prices. Building construction increased 25.4%, but civil engineering declined 21.5%. The construction market is therefore not experiencing a general downturn; it is undergoing a major shift in the type of work being delivered.
The forward pipeline is much stronger than current output. New contracts on Serbian territory increased 85.6% year on year, while the value of new contracts secured by Serbian contractors rose 86.2%. This indicates that the decline in physical activity may be temporary, with a larger execution cycle developing for the remainder of 2026 and into 2027.
The conversion of contracts into construction revenue is not automatic. Large projects require completed design, land access, permits, advance payments, mobilisation and procurement before physical progress begins. Serbia’s forthcoming workload, including transport, utility and Expo 2027 infrastructure, could place considerable pressure on contractor capacity.
Labour data remain weaker than the order pipeline. The number of workers on sites in Serbia fell 5.5%, while hours worked declined 6.9%. For Serbian contractors including their foreign operations, employment fell 6.4% and hours worked decreased 7.8%.
The mismatch between an expanding order book and declining site labour creates execution risk. Contractors may need to recruit additional workers, increase subcontracting or rely more heavily on imported labour. These measures can raise costs and reduce productivity during mobilisation.
Serbian contractors also recorded a substantial fall in foreign activity. The nominal value of works performed abroad fell to only 48.3% of the first-quarter 2025 level. Domestic public and private investment will therefore become more important in sustaining contractor revenue.
The permitting pipeline supports continued building activity. The number of permits issued in January-April increased 7.5%, including 5.8% growth for buildings and 15.9% for other construction. Planned dwellings increased 5.9%, although their total useful floor area was unchanged. This points towards a reduction in average dwelling size rather than a proportionate increase in residential floor space.
Nominal construction figures also understate the pressure on project economics. Imported petroleum products, steel, chemicals, electronics and specialist equipment became more expensive during the period. A project can record higher nominal turnover while delivering less physical work and generating weaker contractor margins.
The strongest immediate signal is the more than 85% increase in new contracts. It provides visibility for future activity but also raises questions about delivery capacity, working capital and contractual risk. Banks and investors should distinguish between signed contracts, notice-to-proceed status, secured procurement and actual construction mobilisation.
Serbia’s construction market is positioned for a potential rebound, but that recovery will depend on whether the large pipeline can be executed without cost escalation, labour shortages and further delays in civil engineering.
