Serbia’s industrial production returned to modest annual growth in June 2026, but the headline increase concealed a sharply divided industrial economy in which automotive, electrical equipment, machinery and chemicals expanded while energy, basic metals, pharmaceuticals and several traditional manufacturing branches contracted.
Total industrial production increased by 0.8 per cent year on year in June and stood 2.3 per cent above the 2025 monthly average. Across the first six months of 2026, output was only 0.7 per cent higher than in the corresponding period of 2025, confirming that Serbia’s industrial recovery remains positive but comparatively shallow.
The underlying monthly movement was weaker than the annual comparison suggests. On a seasonally adjusted basis, total industrial production declined by 0.4 per cent from May, while manufacturing fell by 1.3 per cent. The Serbian economy therefore entered the second half of the year with a higher level of production than a year earlier, but with some loss of short-term momentum. Statistical Office of the Republic of Serbia
The strongest signal came from manufacturing, where output increased by 2.8 per cent year on year. Manufacturing’s performance prevented the energy downturn from pulling the entire industrial index into negative territory. Mining production declined by 1 per cent, while electricity, gas, steam and air-conditioning supply fell by a much steeper 10.4 per cent.
That divergence matters because it shows that the weakness was not uniformly distributed across Serbian industry. Production increased in 16 industrial branches, representing approximately 58 per cent of the industrial structure, while it declined in 13 branches accounting for the remaining 42 per cent. Serbia is not experiencing a generalised industrial recession, but neither is it recording a broad-based expansion.
The most important positive contribution came from the manufacture of motor vehicles, trailers and semi-trailers. Output in this segment increased by 47.1 per cent year on year in June and by the same 47.1 per cent during the first half of 2026. The scale and consistency of that increase indicate that automotive production has become one of the principal engines of Serbia’s current manufacturing cycle.
The result reflects the continuing expansion of Serbia’s vehicle and automotive-component supply chain, including production linked to Stellantis in Kragujevac and the wider network of foreign-owned suppliers operating around Kragujevac, Belgrade, Novi Sad, Niš, Subotica and central Serbia. The transition of the Kragujevac plant towards electric-vehicle production has increased the importance of capital equipment, electrical components, wiring systems, plastics and specialised metal parts within the domestic industrial structure.
Automotive growth also carries a strong export dimension. Serbia’s manufacturing model is closely integrated with European supply chains, particularly those serving Germany, Italy, France, the Czech Republic, Slovakia, Hungary and other Central European vehicle-production centres. The 47.1 per cent increase therefore suggests stronger utilisation of recently installed capacity, recovery from earlier production interruptions or the beginning of a materially higher output cycle.
Electrical equipment manufacturing provided another strong result, expanding by 23.2 per cent year on year in June and 11.3 per cent during January–June. Machinery and equipment production rose by 18.6 per cent in June and 9.3 per cent in the first half.
These branches are commercially important because they generally carry more investment and export value than low-margin consumer manufacturing. Growth in electrical equipment can include cables, motors, switchgear, control systems, household electrical products and components supplied to automotive, construction, energy and industrial clients. Machinery output is similarly connected to factory investment, infrastructure projects and export orders.
Capital-goods production increased by 10.2 per cent year on year in June, while first-half production was 11.3 per cent higher. This was one of the clearest signs of strength in the data. A sustained increase in capital goods normally points to active investment cycles, expanding production lines and demand for equipment rather than growth driven exclusively by household consumption.
Chemical production also performed strongly, increasing by 14.3 per cent year on year and by 7.9 per cent in the first six months. Rubber and plastic products expanded by 5.7 per cent in June and 3.6 per cent during the first half, reinforcing the positive picture across supply chains connected to automotive manufacturing, packaging, construction and consumer industries.
Production of coke and refined petroleum products rose by 10.9 per cent year on year in June, reflecting the restoration of activity at the Pančevo refinery after operational and sanctions-related disruption affected earlier comparisons. First-half output in this category nevertheless remained 1.8 per cent below the same period of 2025, demonstrating that the monthly rebound has not yet fully offset the weak start to the year.
The oil sector remains a material macroeconomic risk. Naftna Industrija Srbije, which operates Serbia’s only refinery, continues to depend on sanctions waivers and a resolution of its ownership structure. Any renewed interruption to crude-oil imports or refinery operations would affect industrial production, fuel availability, transport costs, tax revenues and Serbia’s external trade position at the same time.
Food production increased by 2.7 per cent year on year in June, although first-half output was virtually unchanged, declining by 0.1 per cent. Beverage production slipped by 0.6 per cent in June but remained 1.8 per cent higher across the first six months. These figures indicate stable rather than dynamic consumer-goods production.
Non-durable consumer-goods output fell by 3.9 per cent year on year in June and by 1.2 per cent during the first half. Durable consumer goods performed even more weakly, declining by 11.5 per cent in June and 13.2 per cent across January–June.
This contraction contrasts with relatively strong domestic retail activity. Serbia’s retail turnover increased by 4.3 per cent in real terms in June and by 7 per cent during the first half of 2026. The difference suggests that part of the increase in consumer demand is being met through imports rather than higher domestic production, particularly in product categories where Serbian manufacturers remain exposed to weak European orders, price competition and higher operating costs.
The negative side of the industrial data is most visible in energy-intensive and traditional manufacturing.
Basic-metals production declined by 13 per cent year on year in June and by 11.7 per cent during the first half. Fabricated metal products, excluding machinery and equipment, fell by 11.3 per cent in June and 8 per cent across the six-month period. These are significant contractions for a country in which steel, copper processing, aluminium products, machinery components and fabricated metals form an important part of the export base.
Weakness in basic metals cannot be separated from the condition of European industry. Serbian producers remain exposed to subdued construction activity, uneven automotive demand, pressure on European manufacturing margins and volatile electricity and raw-material costs. Metal producers also face growing compliance and financing requirements related to the EU’s Carbon Border Adjustment Mechanism, which entered its definitive financial phase in 2026.
For Serbian exporters of iron, steel, aluminium and other covered products, production competitiveness now depends not only on labour costs and logistics but also on the verified carbon intensity of each tonne sold into the European Union. Companies with high embedded emissions face an increasing disadvantage against suppliers able to document lower-carbon electricity, efficient furnaces, recycled inputs and reliable plant-level emissions data.
The industrial figures therefore capture only part of the commercial pressure. A Serbian metals producer may maintain physical output while losing margin because an EU buyer discounts the product for its carbon exposure, verification risk or future CBAM certificate cost. The 11.7 per cent first-half decline in basic-metals output suggests that this adjustment is already taking place against a difficult European demand background.
Computer, electronic and optical-product manufacturing recorded one of the steepest declines, falling by 20.4 per cent year on year in June and 19.7 per cent in the first half. Pharmaceutical production declined by 24.5 per cent in June, although its first-half result was only 0.4 per cent lower, suggesting that the monthly fall may reflect production scheduling or a high comparison base rather than a structural collapse.
Other transport-equipment production fell by 75 per cent year on year in June and by 51.8 per cent across the first half. Printing and reproduction activities declined by 17.1 per cent in June, while leather-product manufacturing fell by 13.8 per cent. Clothing production was down 3 per cent in June and 11.6 per cent during January–June.
These branches underline the erosion of Serbia’s older labour-cost-based manufacturing model. Textiles, clothing, leather and basic assembly operations face wage pressure, workforce shortages, automation requirements and competition from lower-cost locations. Their contraction is occurring alongside strong growth in automotive, electrical and machinery production, creating a gradual shift towards more capital-intensive foreign-investment-led manufacturing.
Mining output declined by 1 per cent in June and by 0.6 per cent during the first half, but the aggregate again concealed different trajectories. Metal-ore extraction rose by 2.4 per cent year on year and 2.9 per cent during January–June, supported by Serbia’s large copper and gold operations in the Bor and Majdanpek mining basin.
Coal extraction moved in the opposite direction, declining by 5.1 per cent in June and 4.9 per cent across the first six months. Lower coal output is directly relevant to electricity generation because Serbia continues to depend heavily on lignite-fired power plants operated by Elektroprivreda Srbije.
Electricity, gas, steam and air-conditioning supply fell by 10.4 per cent year on year in June and by 4.2 per cent during the first half. The June decline reflects weak hydrology, operational pressure on thermal generation and a difficult comparison with the previous year.
Extremely low water levels on the Danube reduced output at the Đerdap 1 hydroelectric plant to roughly one-third of its usual daily production. At the same time, low river flows affected thermal-plant cooling and fuel transport. The energy contraction consequently represents both an industrial production problem and a cost risk for the wider manufacturing sector.
Electricity-intensive companies are vulnerable to higher wholesale prices even when they buy under bilateral supply contracts. Energy suppliers eventually incorporate the cost of imports, balancing and peak-hour scarcity into renewed commercial offers. Metals, chemicals, rubber, plastics, cement and other heavy industrial activities can therefore experience margin compression several months after the initial hydrological shock.
The energy decline also complicates the interpretation of Serbia’s economic growth. Preliminary data show that real gross domestic product expanded by 3.6 per cent year on year in the second quarter of 2026, accelerating from 3.2 per cent in the first quarter. GDP is growing substantially faster than industrial production, implying that construction, services, retail activity, public investment and domestic consumption are carrying much of the expansion.
This composition can support headline growth, particularly as expenditure connected with infrastructure and Expo 2027 intensifies. It is less reassuring from the perspective of external competitiveness. Construction and consumption can generate growth while increasing imports, whereas manufacturing exports provide foreign-currency revenue and a more durable basis for productivity improvements.
Serbia’s June result therefore marks progress, but not an industrial breakout. Manufacturing growth of 2.8 per cent and capital-goods growth of 10.2 per cent show that parts of the economy are expanding rapidly. Automotive output, electrical equipment, machinery and chemicals are becoming stronger pillars of the production base.
At the same time, the 10.4 per cent decline in energy supply, 13 per cent fall in basic metals and month-on-month contraction in seasonally adjusted manufacturing reveal the constraints beneath the headline figure. Serbia’s industrial cycle is increasingly concentrated in a limited number of modern, frequently foreign-owned and export-oriented plants, while traditional industries and the domestic energy system struggle to maintain output.
The strength of the second half will depend on whether automotive production sustains its current pace, European industrial demand improves and the Danube’s hydrological conditions normalise. The more structural test lies in whether Serbia can translate strong individual investments into broader domestic supplier development, more reliable electricity supply and lower-carbon industrial production capable of retaining access to the EU market under the new CBAM cost structure.
