Serbia’s economy grew 3.8% year on year in the second quarter of 2026, faster than initially estimated, as construction rebounded sharply and household consumption strengthened, adding to signs that growth accelerated heading into the second half of the year.
The Statistical Office revised its preliminary second-quarter estimate from 3.6% and said seasonally adjusted gross domestic product increased 1.5% from the previous quarter, compared with growth of just 0.2% in the first three months of the year.
GDP had expanded 3.2% year on year in the first quarter.
The detailed figures show a broad improvement rather than growth driven by a single sector.
Construction output rose 9.1% year on year, reversing a 5.1% contraction in the first quarter, while professional, scientific, technical and administrative services expanded 5.8%.
Trade, transport, accommodation and food services grew 4.4%.
On the expenditure side, household consumption increased 4.0%, gross fixed-capital formation rose 3.3%, exports increased 4.1% and imports grew 5.2%.
The stronger data reinforce expectations that domestic demand and Serbia’s large infrastructure programme will remain important growth drivers through the rest of 2026.
They also complicate the government’s fiscal argument after parliament approved a revised budget that raises the planned deficit to 3.5% of GDP from 3%, despite stronger revenue performance.
Construction returns as a growth engine
The most significant shift in the second-quarter data came from construction.
The sector had been a drag on growth early in the year after several years in which road, railway, energy and urban-development projects contributed heavily to investment activity.
Its 9.1% rebound suggests that infrastructure execution has accelerated again.
Serbia is simultaneously working on motorways, expressways, railway upgrades, EXPO 2027 infrastructure, healthcare facilities and energy projects, while Belgrade and several regional centres are seeing large private property developments.
That pipeline is likely to keep construction activity elevated, although it also increases exposure to project cost inflation and additional public borrowing.
Several major infrastructure schemes have already required expanded financing or budget reallocations.
The 2025 final budget account showed spending on the Morava Corridor reaching around RSD 41 billion, compared with RSD 30 billion originally planned for that year, while around RSD 22 billion was spent on a new EXPO-related programme that had not appeared in the original budget.
That makes construction simultaneously one of Serbia’s strongest growth drivers and one of its most important fiscal risks.
Domestic consumption strengthens
Household consumption expanded 4%, supported by rising wages, low unemployment and continued credit growth.
Serbia’s unemployment rate fell to 7.2% in the second quarter, although labour-market data also showed employment declining from a year earlier and inactivity increasing.
That combination points to an increasingly tight labour supply.
For businesses, the result is higher wage pressure and a greater incentive to automate.
For consumers, rising income continues to support retail and services spending.
The government is adding further fiscal support.
The revised 2026 budget includes a large package of household transfers and other measures while overall expenditure is being raised substantially more than revenue.
That could reinforce consumption in the second half.
It also increases the risk that fiscal policy becomes pro-cyclical if the economy is already growing close to capacity.
Investment remains positive
Fixed investment rose 3.3%, providing another positive contribution.
Serbia continues to attract foreign direct investment in automotive components, batteries, robotics, mining, renewable energy and manufacturing, while the government is maintaining one of Europe’s highest levels of public capital expenditure relative to GDP.
The revised budget sets capital spending at about RSD 779.9 billion, equivalent to roughly 7% of GDP.
That level of investment can support productivity if projects are well selected and delivered efficiently.
But the growth model is becoming increasingly capital intensive.
Serbia’s labour force is no longer expanding fast enough to support growth primarily through additional employment.
New factories increasingly need automation, machinery and higher output per worker.
Recent investments in humanoid robots, advanced batteries and higher-value automotive components fit that shift.
Exports rise, but imports still grow faster in GDP data
Exports of goods and services increased 4.1% in real terms in the second quarter, while imports rose 5.2%.
The difference suggests domestic demand remained strong enough to draw in additional imports even as exporters expanded.
That does not necessarily conflict with separate merchandise-trade data showing an improving goods deficit during the first seven months of the year.
GDP trade figures include services and are measured in real terms, while customs statistics track nominal merchandise values.
Taken together, the figures suggest Serbia is maintaining strong domestic demand while still improving parts of its external position.
That balance will be important.
A growth acceleration driven mainly by imports and consumption would create larger external imbalances.
Growth supported by exports and productive investment would be more sustainable.
Services continue to support expansion
Professional, scientific, technical and administrative activities grew 5.8%, showing that Serbia’s expansion is not confined to traditional manufacturing and construction.
The country has developed a sizeable IT and professional-services sector over the past decade.
Those activities typically require less physical capital than heavy industry and often generate higher value added per employee.
The combination of stronger services and renewed construction therefore gives the second-quarter growth profile more breadth than the headline figure alone suggests.
Trade, transport and hospitality growth of 4.4% also points to resilient consumer activity and transport demand.
Belgrade airport handled more than one million passengers in July for the first time, while road and tourism infrastructure is expanding across the country.
Stronger GDP reduces the case for fiscal stimulus
The acceleration comes at an awkward time for fiscal policy.
Parliament on Aug. 31 approved a revised budget raising revenue and receipts by around RSD 112.5 billion, but expenditure by approximately RSD 171.5 billion.
That increases the planned deficit to 3.5% of GDP.
Serbia’s Fiscal Council has argued that underlying fiscal performance was strong enough for the deficit to end the year around 2%-2.5% of GDP without the additional spending measures.
The stronger GDP data reinforce that argument.
Fiscal expansion is easier to justify when growth is weak and private demand is contracting.
The second-quarter numbers show the opposite.
Quarter-on-quarter growth of 1.5% represents a substantial acceleration.
Construction is recovering.
Household consumption is expanding.
Investment remains positive.
Against that backdrop, additional fiscal stimulus could support output in the short term but also increase inflation, imports and financing requirements.
Serbia still needs growth quality, not just speed
The stronger quarter does not eliminate structural risks.
Employment is no longer rising alongside output.
The workforce is ageing.
Public investment remains dependent on heavy state spending.
Foreign-owned companies account for a large share of manufacturing exports.
And Serbia still needs deeper domestic supplier networks if investment is to generate more locally retained value.
The economy is therefore moving into a different phase.
The central question is no longer whether Serbia can generate growth above 3%.
It is whether that expansion can become more productive and less dependent on additional labour and public spending.
Second-quarter data provide some encouraging signals.
Fixed investment remains positive.
Services are expanding.
Construction has recovered.
Exports are rising.
But the same figures also show a government stimulating demand at a time when economic momentum is already strengthening.
With 3.8% annual growth and 1.5% quarterly expansion, Serbia enters the second half of 2026 with considerably stronger momentum than the first-quarter data suggested.
That makes the next policy test increasingly clear: converting a cyclical acceleration into productivity growth without allowing fiscal expansion to recreate inflationary or external imbalances.
