Serbia’s new 2026–2027 industrial-policy action plan marks a shift in language that is more important than it may first appear. The government is no longer presenting industrial policy only as a question of attracting foreign factories, subsidising jobs and lifting export volumes. The official target is now a gradual transformation from a labour-intensive model based on lower-value products toward a capital-intensive model built around higher-value-added production, stronger technology content and cleaner industrial processes.
That is the right strategic diagnosis. Serbia’s manufacturing base has expanded over the past decade, supported by foreign direct investment, industrial zones, automotive suppliers, electronics assembly, cables, machinery, metal processing and food production. But the next stage is more difficult. Higher wages, tighter labour supply, EU carbon rules, automation, supply-chain localisation and weaker foreign-investment inflows all push Serbia toward a model where competitiveness depends less on cheap labour and more on technology, productivity, energy efficiency, supplier quality and export certification.
The government plan is built around five core areas: digitalisation, innovation, investment, upgrading the technological structure of exports and green transition. It gives special attention to the application of artificial intelligence in business, stronger corporate digital security, innovation projects, green investments and higher exports of technologically more advanced products. During the previous 2024–2025 action-plan cycle, Serbia reportedly implemented 67 out of 71 planned activities, or more than 94 per cent; labour productivity in manufacturing rose by 9.5 per cent, while gross value added per employee increased from €19,000 to €20,800.
The numbers show progress, but also the scale of the gap. A manufacturing value-added level of around €20,800 per worker is still not enough to place Serbia firmly inside Europe’s higher-productivity industrial group. The country can no longer rely only on incremental efficiency gains in existing factories. It needs deeper capex: automation, robotics, testing laboratories, digital production control, industrial software, energy-management systems, process optimisation, product development and supplier certification. This is where the action plan’s real test begins.
The most visible financial commitment is investment support. For industrial investment incentives, the plan allocates RSD 23.1bn in 2026, equal to roughly €197mn, and RSD 24.5bn in 2027, or about €209mn, using a recent exchange level of around RSD 117.4 per euro. Business infrastructure receives more than RSD 3bn per year, around €25.6mn annually, while the Serbian-Chinese industrial park “Mihajlo Pupin” in Belgrade is allocated RSD 80mn in 2026 and RSD 100mn in 2027, equal to around €0.7mn and €0.9mn respectively.
The imbalance inside the budget is revealing. The largest share still goes to classic investment support, while the sums for circular economy and industrial green transition remain small. For the specific objective covering the transition from a linear to a circular industrial model, the budget provides only RSD 2mn in 2026 and RSD 3mn in 2027, equal to roughly €17,000 and €26,000, with an additional RSD 11.4mn, around €97,000, expected through donor support from GIZ in 2026. That is not yet the financial envelope of a deep green-industrial transformation. It is closer to a policy signal, training platform and preparatory framework.
Innovation support is more meaningful, but still modest relative to the scale of the industrial transition Serbia says it wants. The Innovation Fund is assigned RSD 120mn in 2026 and RSD 240mn in 2027, or approximately €1.0mn and €2.0mn. The Science Fund receives RSD 393.4mn in 2026 and RSD 117.5mn in 2027, around €3.4mn and €1.0mn. The World Bank-financed SAIGE project adds almost RSD 234mn in 2026 and more than RSD 744mn in 2027, or around €2.0mn and €6.3mn. These amounts can support innovation ecosystems, but they will not by themselves transform the industrial balance sheet unless they are tied to factory-level capex, export contracts and technology adoption by real producers.
The FDI context explains why the state is now putting more emphasis on domestic capital. Foreign direct investment was the central engine of Serbia’s industrial expansion from 2015 to 2024, but the action plan itself notes a decline in FDI inflows during 2025 and argues that activating domestic investment will become more important. Separate market reporting based on central-bank data indicated that Serbia’s net FDI in 2025 fell by 51 per cent to €2.278bn, while total FDI inflow dropped by 34 per cent to €3.477bn.
That change matters because Serbia’s earlier industrial model was heavily dependent on foreign investors bringing production mandates, machinery, export channels and supplier standards. If inflows slow, the domestic economy must do more of the upgrading itself. Local companies need to become stronger suppliers to multinational groups, not only subcontractors for simple processes. That requires certification, traceability, energy and carbon documentation, quality assurance, software integration and management capability. The action plan’s focus on improving the technological structure of exports goes directly to this point.
One of the most important measures is the planned push toward an ACAA agreement with the European Union for electrical and electronic products, machinery and personal protective equipment. Such an agreement would help Serbian producers access the EU market more easily by reducing technical barriers and aligning conformity-assessment procedures. For industrial companies, this is not a bureaucratic detail. It can decide whether a factory remains a low-margin supplier or becomes a qualified exporter able to sell higher-value products into regulated European markets.
The green transition is equally commercial. Serbian SMEs surveyed for the industrial-policy process pointed to weak information, shortage of expert staff and limited financing access as the main barriers to green projects. The plan also recognises gaps in knowledge of the Green Agenda, lack of specialist training and limited access to tools and software for emissions monitoring, carbon-footprint analysis and environmental reporting.
This is where Serbia’s industrial policy now intersects with CBAM, energy costs and EU buyer requirements. Steel, aluminium, cement, fertilisers, electricity and other carbon-exposed value chains increasingly require plant-level data, verified electricity sourcing, energy-efficiency evidence and emissions reporting. A Serbian exporter that cannot document its production process will face a weaker commercial position, even if its product price is competitive. For that reason, green transition should not be treated as a soft ESG theme. It is becoming part of export market access.
The plan therefore has a strong strategic direction but an uneven financial structure. Serbia is correctly identifying the need to move into higher-value production, but the funding mix still leans heavily toward investment incentives and business infrastructure. That can work only if state support becomes more selective. Subsidies should not merely attract square metres of factory space or headcount. They should reward automation, R&D, local supplier development, energy-efficiency investment, export certification, digital production systems and measurable growth in value added per employee.
The macroeconomic background reinforces the urgency. Serbia’s industrial production in April 2026 was 3.4 per cent higher than in April 2025, while Eurostat reported that EU industrial production rose only 0.9 per cent year on year in the same month. Serbia therefore still has a growth window, but the European market it sells into remains weak and highly competitive.
This makes the new action plan less a routine government document than a test of Serbia’s industrial maturity. The country has already built a larger manufacturing base. The next question is whether that base can become technologically deeper, more energy-efficient, more export-certified and less dependent on labour-cost arbitrage. The answer will not be visible in the number of activities formally completed by 2027, but in whether Serbian factories can move from assembly and processing toward products, components and systems with stronger margins, cleaner production data and a more durable place in European supply chains.
