Growth has returned, exports are firmer and consumers are still spending. But high rates, political tension and external shocks mean Serbia’s 2026 recovery is more fragile than the headline numbers suggest.
Serbia has entered 2026 with the kind of economic data that would normally give policymakers comfort. Growth has picked up, wages are rising in real terms, exports are improving and the country’s external position looks less strained than it did a year ago. Yet the mood around the Serbian market is not one of exuberance. It is closer to guarded relief.
The economy expanded by 3.2 per cent year on year in the first quarter of 2026, according to the Statistical Office of the Republic of Serbia, a clear acceleration after a softer 2025. The IMF expects growth to remain robust this year and strengthen in 2027, although it has warned that risks remain tilted to the downside, particularly from external shocks and global market stress.
The recovery is being carried by familiar forces: household spending, public investment, manufacturing exports and a technology sector that has quietly become one of Serbia’s most important sources of hard-currency earnings. Retail trade turnover in April rose 5.6 per cent in real terms from a year earlier, while average net wages in the first quarter were up 8.9 per cent in real terms, giving consumers more room to absorb higher prices and borrowing costs.
But Serbia’s growth story is not yet a clean one. Inflation has moved back into the central bank’s comfort zone, but not far enough to justify a rapid easing cycle. The National Bank of Serbia kept its key policy rate at 5.75 per cent in June, with its deposit and lending facility rates at 4.50 per cent and 7.00 per cent, respectively. Annual inflation was 3.5 per cent in May, up from 3.3 per cent in April, according to the central bank’s news archive.
That leaves Serbia in a familiar emerging-market bind. The central bank has succeeded in preserving currency and price stability, but tight financing conditions continue to weigh on borrowers. Developers, smaller companies and households face a more expensive credit environment than they did before the inflation shock. Banks can live with that. Many businesses cannot.
On the external side, the news is better. Serbia’s goods exports reached €11.78bn in January-April 2026, up 8.2 per cent from a year earlier, while imports rose only 0.5 per cent to €14.11bn. The trade deficit narrowed by 26.1 per cent, and the export-import coverage ratio improved to 83.5 per cent from 77.5 per cent a year earlier. The EU still dominates Serbia’s trade map, accounting for 59 per cent of total external trade in the period.
The current account has also improved sharply, though not enough to remove vulnerability. The National Bank of Serbia said the current account deficit was about €405mn in January-April, almost €934mn lower than in the same period of 2025, helped by stronger exports of goods and services. But the bank still expects the deficit to widen to roughly 6 per cent of GDP for 2026 because of higher energy prices, infrastructure imports and stronger domestic demand.
For investors, the most important question is whether Serbia’s export gains represent a cyclical bounce or a structural shift. There is evidence for both. The country has benefited from earlier foreign direct investment into manufacturing and tradable sectors. But new FDI flows have been uneven. Net FDI rose 81 per cent year on year to €357mn in the first four months of 2026, yet total FDI inflow fell 44 per cent over the same period, and net FDI in 2025 had dropped sharply from the previous year.
This is why Serbia’s market narrative is more nuanced than the growth figures imply. The country is still attractive: it has a strategic position between the EU and the western Balkans, competitive labour costs, a developed automotive and industrial base, and an expanding technology services sector. Its credit profile has also improved: S&P rates Serbia BBB- with a stable outlook, while Fitch rates it BB+ with a positive outlook and Moody’s Ba2 with a stable outlook.
Yet political risk is no longer a background variable. Anti-government protests that began after the Novi Sad railway station awning collapse in November 2024 have continued to shape the domestic climate. Reuters reported clashes between police and protesters in Belgrade in May 2026, with demonstrators demanding snap elections and broader accountability. President Aleksandar Vučić and his allies deny accusations of corruption and say action has been taken over the collapse.
The result is a market with solid macroeconomic buffers but a higher political risk premium. For portfolio investors, Serbia offers yield and a stabilised currency regime, but its capital markets remain shallow. For strategic investors, the country offers access to skilled labour, manufacturing capacity and regional logistics — but the calculus increasingly requires a view on governance, EU integration and social stability.
Serbia’s recovery is therefore real, but not risk-free. The economy is moving forward, though not fast enough to ignore the drag from interest rates, politics and energy exposure. The flagship question for the rest of 2026 is whether Serbia can turn resilience into confidence. That will depend less on one quarter’s GDP print than on whether export momentum, FDI quality and institutional credibility can move in the same direction.
