Serbia’s latest investor presentation from the National Bank of Serbia presents an economy that remains fundamentally stable, but increasingly shaped by a more complex external environment. Inflation is still under control, foreign exchange reserves are high, public debt remains on a declining path, the banking sector is well capitalised, and credit activity is accelerating. Yet the tone of the data is no longer purely defensive. Serbia’s macro story is moving from post-inflation stabilisation into a new phase where growth depends more heavily on investment execution, domestic demand, infrastructure delivery and the ability to absorb renewed global energy and geopolitical shocks.
The central macro signal is that Serbia avoided a sharper slowdown at the start of 2026. Real GDP expanded by 3.0% year on year in the first quarter, broadly in line with the NBS’s February expectations. That growth rate is not spectacular, but it is resilient given weaker European demand, pressure in parts of manufacturing, geopolitical tensions and higher energy-price risks. The NBS now expects GDP growth of 3.0% for 2026, before an acceleration to 4.5% in 2027, supported by the Expo-related investment cycle and service exports.
This matters for investors because Serbia’s growth model is entering a more project-driven phase. The previous cycle was supported by export-oriented foreign direct investment, industrial diversification, labour-market gains and relatively stable domestic demand. The next phase depends more clearly on whether major infrastructure and Expo-linked works translate into productive capacity rather than only temporary demand. The NBS explicitly links future growth to consumption, investment, higher disposable income and continued implementation of projects under the “Leap into the Future – Serbia Expo 2027” programme.
The revision of the 2026 growth projection from 3.5% to 3.0% is therefore not a warning of macro weakness, but it is a reminder that Serbia’s investment story is exposed to global conditions. The NBS attributes the downgrade mainly to intensified geopolitical tensions, including the Middle East conflict, which has pushed up energy prices and weighed on investment and consumer confidence. The same logic reduced the 2027 projection from 5.0% to 4.5%. Serbia still has a positive growth path, but the margin for execution errors has narrowed.
Inflation remains broadly contained, although the profile is becoming less comfortable. Average inflation in 2025 was 3.8%, while December inflation was 2.7%. Inflation stayed below the central target value in the first quarter of 2026, but accelerated to 3.3% year on year in April, mainly because of higher global oil prices and their transmission into domestic petroleum product prices. Core inflation remained slightly above 4%, reaching 4.4% in April, driven mostly by services.
For investors, the inflation story is important because it explains why the NBS remains cautious despite the moderation seen over the previous year. Inflation expectations remain anchored within the target range of 3% ± 1.5 percentage points, with one-year-ahead expectations in the financial sector at 3.5% in April according to the Ninamedia survey and 3.8% in the May Bloomberg survey. Medium-term expectations have stayed around the target midpoint, ranging between 3.0% and 3.5%. That anchoring is one of Serbia’s strongest monetary-policy assets.
The risk is that inflation may temporarily move above the upper bound of the target range at the end of 2026 and the beginning of 2027, partly because of a low base and partly because of higher global energy and commodity prices. The NBS expects inflation to return to the target range by mid-2027, supported by restrictive monetary policy, weaker external cost pressures and slower real wage growth that is more closely aligned with productivity. This is a credible baseline, but it remains exposed to oil prices, supply chains, the agricultural season and domestic demand growth.
The policy-rate signal is deliberately conservative. In May, the NBS kept the reference interest rate at 5.75%. The decision reflects a central bank that does not want to overtighten into a moderate growth environment, but also does not want to underreact to external shocks. The NBS’s message is that the expected inflation increase should be temporary and limited, but that it stands ready to use available monetary-policy instruments if secondary effects become more pronounced.
That stance has clear implications for banks, corporates and the bond market. Serbia is not in an emergency monetary setting, but neither is it in a full easing cycle. Borrowing conditions have improved compared with the peak-rate period, helped by previous easing from the NBS and the European Central Bank, yet the central bank is maintaining optionality. The policy balance is designed to protect price stability, preserve the relative stability of the dinar and avoid a renewed inflation spiral at a time when credit growth is already strong.
Credit activity is one of the most striking parts of the presentation. Lending to the private sector accelerated to 16.9% year on year in March. Household loans rose by 20.9%, while corporate loans increased by 12.0%. Within household lending, growth was driven by cash loans, up 24.0%, and housing loans, up 20.2%, supported by measures for lower-income citizens and the “Housing Loans for Youth” programme. Within corporate lending, liquidity and working-capital loans rose 13.5%, while investment loans increased 12.5%.
This is a constructive signal for domestic demand and banking-sector profitability, but it also changes the macro balance. Rapid household lending supports consumption and housing activity, but it must remain aligned with income growth and debt-service capacity. Corporate lending growth is positive, especially where it supports investment, but the strong role of working-capital finance suggests that part of the borrowing cycle is still defensive or operational rather than purely expansionary. Serbia’s credit cycle is healthy because banks remain strong, but its quality will depend on whether credit increasingly shifts toward productivity-enhancing investment.
The banking sector enters this phase from a position of strength. The NPL ratio stood at only 2.09% in March 2026, while the capital adequacy ratio was 19.5%, well above the regulatory minimum of 8.0%. These figures show that faster lending is not yet creating visible asset-quality stress. The financial system has room to support growth, provided loan underwriting remains disciplined and household leverage does not accelerate faster than income.
Serbia’s external position gives the investor story another stabilising anchor. The current account deficit in the first quarter of 2026 was only €179.3 million, equal to 0.8% of GDP. This was €472 million lower than in the same period of the previous year, helped by stronger exports of goods and services, which increased 6.4% year on year, while imports grew 2.5%. The goods and services deficit stood at a record-low 2.4% of GDP in the first quarter, far below the five-year average of 6.7%.
However, the NBS expects the current account deficit to widen to 5.9% of GDP in 2026, reflecting higher energy prices, investment needs and rising disposable income. It then expects the deficit to narrow to 4.0% in 2027, supported by services exports connected to Expo. This is a crucial point. Serbia’s external balance looks strong in the first quarter, but the full-year profile is expected to become more import-intensive as investment and consumption accelerate. The quality of FDI and export growth will therefore remain central to the country’s balance-of-payments resilience.
The export structure remains a positive part of the story. Goods exports grew by 8.7% in 2025, despite weaker demand from the EU and the region, and the strong momentum continued in the first quarter of 2026, when goods exports increased 7.4% year on year and imports rose only 3.0%. The NBS emphasises Serbia’s production and geographical diversification and the role of export-oriented investments, especially in processing industries and automotive-related branches. This supports the argument that Serbia’s export base is deeper than it was a decade ago.
Foreign direct investment also remains material. Between 2018 and 2025, total FDI amounted to €28.4 billion, with almost 60% directed into tradable sectors and around €8.4 billion into manufacturing. In 2025, FDI inflow amounted to €3.5 billion, while net inflow reached €2.3 billion because of increased resident investment abroad. In the first three months of 2026, net FDI inflows amounted to €192.4 million, covering the current account deficit, while total inflows reached €369.3 million.
This FDI composition is important for Serbia’s sovereign and corporate credit story. Investment into tradable sectors reduces dependence on purely domestic demand, strengthens the export base and improves resilience to regional demand shocks. The growing share of higher-value activities, including scientific, technical and innovative activities, also supports Serbia’s longer-term productivity narrative. The challenge is to move from FDI volume to FDI quality: more export value added, deeper supplier networks, stronger domestic engineering content and better integration with energy, logistics and skills policy.
Foreign exchange reserves are another major stabiliser. At the end of April 2026, Serbia’s FX reserves stood at €28.2 billion, covering slightly less than seven months of goods and services imports and around 160% of M1 money supply. The gold component is now especially visible: since 2012, the quantity of gold has increased more than threefold to 54 tonnes, while its value exceeded 24% of total reserves. This gives the NBS a strong buffer against external shocks, capital-flow volatility and exchange-rate pressure.
The exchange-rate regime remains a core part of Serbia’s stability framework. The dinar weakened against the euro by only 0.2% during 2025, and by 0.1% from the start of 2026 to April. The NBS was a net seller of €580 million on the foreign exchange market in 2025, and sold €1.205 billion net in the first four months of 2026, while intervening on the purchase side in April. This shows that the central bank remains active in smoothing market pressures, especially when uncertainty or seasonal demand for foreign currency rises.
Dinarisation continues to improve, which reduces balance-sheet risk over time. Household receivables in dinars increased from 35.1% in 2012 to 56.5% in March 2026, lifting the dinarisation of total corporate and household receivables to 39.7%. Dinar savings rose by almost 8% during 2025 and by RSD 14.9 billion in the first four months of 2026, reaching RSD 221 billion. The dinarisation of corporate and household deposits amounted to 45.0% in March 2026, up 25.7 percentage points from the end of 2012.
On fiscal policy, Serbia’s debt trajectory remains one of the stronger sovereign-credit indicators. The general government recorded a deficit of RSD 252.3 billion, or 2.4% of GDP, in 2025, while capital expenditure remained high at RSD 715 billion, or 6.9% of GDP. In the first quarter of 2026, the general government deficit reached RSD 112.9 billion. Revenues rose 13.5% year on year, driven by social security contributions, VAT and corporate income tax, while expenditures increased 21.9%, reflecting higher capital expenditure and increased spending on wages and pensions.
Public debt remains on a downward path. At the end of March 2026, central government debt stood at 41.7% of GDP, while general government debt was 42.0% of GDP, down 2.7 percentage points from the end of 2025. The revised fiscal strategy projects a deficit of 3.0% of GDP in 2026 and 2027, followed by 2.5% in 2028, with public debt expected to remain broadly contained. For bond investors, the combination of debt below the Maastricht threshold, high FX reserves and an investment-grade rating is central to Serbia’s relative positioning.
The rating story has changed materially since 2024. Standard & Poor’s assigned Serbia an investment-grade rating of BBB- with a stable outlook in October 2024. Fitch confirmed Serbia at BB+ with a positive outlook in January 2026, while Moody’s maintained a Ba2 rating in February 2026, changing the outlook from positive to stable. The NBS points to higher GDP per capita relative to countries with the same rating, strong reserves, lower debt and responsible monetary and fiscal policy as key factors supporting the rating profile.
Serbia’s euro-denominated risk premium also remains comparatively contained. After rising in March because of heightened global uncertainty following the escalation in the Middle East, the premium resumed a downward trajectory in April. Compared with the end of 2025, Serbia’s risk premium on euro-denominated debt was 15 basis points lower at the end of April, at 144 basis points. That matters because it reflects not only domestic fundamentals, but also Serbia’s relative position against regional peers in a volatile external environment.
The investor reading is therefore balanced but still constructive. Serbia offers a combination of moderate growth, contained inflation, high reserves, falling debt, strong bank capital, low NPLs and investment-grade access. The vulnerabilities are also clear: inflation may temporarily rise above target, growth has been revised down, the current account deficit is expected to widen, and the next phase depends heavily on investment execution, Expo-related delivery and external energy conditions.
For corporates, the environment is supportive but not risk-free. Credit is available, demand is rising, and borrowing costs are more favourable than in the peak-rate period. Yet the cost of capital is not collapsing, and the NBS is unlikely to abandon caution while global energy and geopolitical risks remain elevated. Companies with export exposure, strong dinar cash flows, low FX mismatch and disciplined working-capital management will be better positioned than firms relying purely on imported inputs and domestic demand.
For banks, the opportunity is visible in fast credit growth and strong asset quality. The challenge is to maintain underwriting discipline while household lending expands above 20% year on year and cash loans remain a major driver. For the sovereign, the task is to preserve the credibility earned through disinflation, fiscal restraint and reserve accumulation while financing a large infrastructure and Expo-related investment cycle.
Serbia’s macro platform remains stronger than it was in earlier cycles. The country has more diversified exports, deeper FDI, higher reserves, stronger banks and lower public debt. The question for 2026–2027 is whether those buffers can be converted into a higher-quality growth phase, where infrastructure, investment and credit expansion lift productivity rather than only demand. The latest NBS presentation shows that Serbia has the balance-sheet capacity to do it; the next test is execution.
