Serbia’s economy expanded by around 3% year-on-year in the first quarter of 2026, according to the latest edition of the monthly Macroeconomic Analyses and Trends (MAT) bulletin, giving the country what analysts describe as, for now, one of the strongest GDP growth performances in Europe. At the same time, economists warned that Serbia continues to face a structurally higher inflation environment than most European economies, complicating the broader macroeconomic outlook.
The result comes after a weaker 2025, when Serbia’s full-year economic growth slowed to around 2%, reflecting softer industrial activity, weaker European demand and disruptions linked to the regional manufacturing cycle. The new quarterly figure therefore signals a partial recovery, although growth remains below the levels recorded during the post-pandemic acceleration phase.
According to MAT economists, the main drivers of first-quarter growth were the services sector, trade activity and net taxes, while construction and parts of industrial production continued to lag. That divergence increasingly reflects the changing structure of Serbia’s economy, where consumption, retail and services have become more resilient than industrial and export-oriented sectors tied to wider European manufacturing demand.
Industrial activity nevertheless improved sharply in March. Serbia’s industrial production rose 6.4% year-on-year, while manufacturing output increased 8.4%, supported in part by the temporary normalization of operations at the Pančevo Oil Refinery, operated by NIS. Analysts noted that refinery operations had a particularly strong effect on manufacturing statistics after previous operational disruptions and maintenance cycles weighed on output earlier in the year.
External trade indicators also improved. Merchandise exports in March increased 15.4%, while imports rose 6.3%, narrowing Serbia’s trade deficit by more than 23% year-on-year. Export coverage of imports reached 84.5% in the January–March period, compared with 79.1% during the same period a year earlier, suggesting an improvement in external balance conditions despite continuing pressure from energy imports and industrial inputs.
The fiscal picture has also remained relatively stable. Serbia recorded a budget deficit of approximately RSD 97.9bn during the first quarter, which was significantly better than planned and roughly RSD 80bn below the government’s original projection for the period. The stronger-than-expected fiscal performance reflects resilient VAT collection, import activity and continued public revenue growth tied to inflation and wage increases.
Still, inflation remains the central macroeconomic vulnerability. While much of Europe has seen a more visible easing of consumer-price growth following the energy shock cycle of 2022–2024, Serbia continues to experience stronger domestic price pressures. Rising wages, food-price volatility, imported inflation and elevated service-sector costs continue to keep inflation above broader European averages, limiting the room for rapid monetary easing by the National Bank of Serbia.
That divergence creates a more complicated environment for policymakers. Serbia’s economy is still generating growth faster than many European peers, but the composition of that growth matters increasingly. A larger share is being driven by state-backed investment, infrastructure projects, services and public-sector spending rather than broad industrial expansion. At the same time, weak conditions in parts of European heavy industry continue to affect Serbia’s export manufacturing base, especially automotive supply chains, metals and industrial intermediates.
The broader European environment also remains uncertain. Germany’s industrial slowdown, weaker manufacturing demand across the eurozone and geopolitical uncertainty around energy markets continue to weigh on the region’s industrial cycle. For Serbia, whose economy remains heavily integrated into European supply chains, the sustainability of the current recovery will depend partly on whether European industrial demand stabilizes during the second half of 2026.
The stronger first-quarter GDP figure nevertheless gives Belgrade additional political and financial room ahead of major state investment plans linked to transport infrastructure, energy projects and preparations for EXPO 2027 Belgrade. With Serbia simultaneously active in international debt markets and continuing to attract foreign industrial investment, the government is attempting to position the economy as one of the faster-growing markets in Southeast Europe despite broader continental stagnation.
