Serbia’s economy expanded 3.8% year on year in the second quarter of 2026, stronger than an earlier estimate of 3.6%, as construction, services and household consumption helped accelerate growth despite signs of weakness in industrial production.
The latest reading marked an acceleration from 3.2% growth in the first quarter and brought real GDP growth for the first half of the year to about 3.5%, according to data from the Statistical Office and the National Bank of Serbia.
On a seasonally adjusted basis, GDP increased 1.5% from the previous quarter, strengthening from the 0.5% quarterly expansion recorded in January-March.
The upward revision from the preliminary 3.6% estimate published in July points to somewhat stronger economic momentum entering the second half of the year, although July industrial data showed that growth remains uneven across sectors.
Construction was the strongest major contributor on the production side, with real gross value added increasing 9.1% year on year in the second quarter.
Professional, scientific, technical, administrative and support activities expanded 5.8%, while the combined wholesale and retail trade, transport, storage, accommodation and food services sector grew 4.4%.
The expenditure breakdown also showed relatively broad-based expansion.
Household consumption increased 4.0%, while government consumption rose 2.5%. Gross fixed capital formation increased 3.3%, indicating that investment continued to support economic activity alongside consumer spending.
Exports of goods and services grew 4.1%, but imports increased faster, by 5.2%, suggesting stronger domestic demand also translated into higher demand for foreign goods and inputs.
The latest GDP data improve the picture presented by the July flash estimate, but high-frequency indicators point to a more mixed start to the third quarter.
Industrial production fell 2.3% year on year in July, primarily because of lower output in energy and manufacturing.
Energy production declined 8.8%, while manufacturing output fell 1.6%. Mining was stronger, increasing 3.0%.
Within manufacturing, production declined in 15 of 24 industrial branches.
Petroleum-product output fell 13.0% year on year, while production of fabricated metal products dropped 6.5%.
Motor vehicle and trailer manufacturing moved sharply in the opposite direction, expanding 29.6%, continuing to provide one of the stronger growth impulses within Serbia’s manufacturing base.
For January through July, total industrial production remained 0.3% above the corresponding period of 2025.
Manufacturing output increased 1.3% during the seven-month period, while mining was almost unchanged, declining 0.1%. Energy production fell 4.8%.
The divergence between industrial output and GDP growth highlights the increasing importance of domestic consumption, construction and services in Serbia’s current expansion.
Retail activity remained particularly strong.
Real retail turnover increased 8.2% year on year in July, while growth over the January-July period reached 7.3%.
Tourism indicators also continued to improve. Tourist arrivals increased 4.4% year on year in July, while overnight stays rose 1.9%.
During the first seven months of the year, arrivals were 6.2% higher than a year earlier and overnight stays increased 4.4%.
Foreign trade continued to expand despite weaker industrial production.
Serbia’s merchandise exports measured in euros increased 8.9% year on year in July, while imports rose 5.0%.
Export growth was driven mainly by manufacturing and agriculture, while increased imports of intermediate goods provided the largest contribution to import growth.
The labour market also remained supportive.
Serbia’s unemployment rate fell to 7.2% in the second quarter, its lowest level recorded under the current labour-force survey series, while the employment rate stood at 50.9%.
The combination of stronger employment, rapid retail-sales growth and rising household consumption suggests domestic demand is playing an increasingly important role in supporting economic activity.
That composition could help insulate Serbia from weaker conditions in some of its external industrial markets, but it also increases the importance of inflation, wage growth and household purchasing power for the sustainability of the expansion.
Investment will be another key determinant of growth in the second half.
The 3.3% increase in fixed investment during the second quarter, combined with construction growth of more than 9%, indicates that infrastructure, commercial development and other investment activity remain important components of the economy.
At the same time, the July decline in manufacturing and energy output shows that the industrial sector has yet to establish a similarly strong growth trajectory.
The faster increase in imports than exports in the second quarter also suggests that stronger domestic demand could widen the contribution of net imports against GDP if that pattern continues.
For policymakers, the revised second-quarter figures nevertheless provide a stronger base for full-year growth.
After expanding 3.2% in the first quarter and 3.8% in the second, Serbia entered the second half of 2026 with first-half growth of around 3.5%, supported by construction, consumption and services.
The main question for the remainder of the year will be whether those sectors can maintain their momentum while manufacturing and energy recover from the weakness evident in July.
