Serbia’s first quarter of 2026 has produced a macroeconomic picture that looks stable from a distance but uneven under the surface. The headline is respectable: real GDP expanded by around 3.0% year-on-year in the first quarter, placing Serbia among the stronger performers in Europe. Yet the composition of that growth tells a more complicated story. Services, trade, net taxes and household demand carried the economy, while industry and construction created visible drag.
That split is now the defining feature of Serbia’s economic cycle. The country is not entering 2026 from a position of macro weakness. Inflation remains below 3%, wages are still rising in real terms, retail turnover is strong, banks continue to lend, and the state retains room to support public investment. But the productive side of the economy is moving less smoothly. Industrial production was still 0.8% lower year-on-year in the first quarter, despite a strong March rebound. Manufacturing was down 0.4%, mining fell 3.2%, and electricity, gas, steam and air-conditioning supply declined 0.9%.
March offered relief, but not full reassurance. Total industrial output rose 6.4% year-on-year, while manufacturing increased 8.4%. That rebound was strong enough to improve the trend-cycle reading and show that Serbia’s industrial base can still respond quickly when operating constraints ease. The problem is that the recovery was partly dependent on temporary normalisation in sectors linked to the Pančevo refinery, making it difficult to treat the March bounce as a clean signal of broad industrial momentum.
The domestic side of the economy looks stronger. Retail turnover in March rose 15.5% nominally and 14.0% in real terms, helped by stronger wages, consumer confidence, credit activity and a favourable base effect from last year’s political and retail-market disruptions. The expansion was broad-based, with real growth of 9.8% in food, beverages and tobacco, 12.9% in non-food products and 27.7% in motor fuels. For the first quarter as a whole, retail remained positive across all major categories.
Wages are central to that resilience. Average net earnings in February reached 116,127 dinars, rising 12.2% nominallyand 9.5% in real terms compared with a year earlier. That gives households a real purchasing-power cushion even as companies face higher labour costs. Serbia is benefiting from the income effect of rising wages, but the same process is raising pressure on margins in labour-intensive industries, construction, logistics, hospitality and services.
The trade picture also supports the two-speed interpretation. Goods exports rose 7.1% in the first quarter to €8.713bn, while imports increased only 0.3% to €10.314bn. The goods deficit narrowed by 25.4% to €1.601bn, and export-import coverage improved to 84.5%. On paper, that looks like a clear external improvement. In practice, part of the narrowing may reflect softer import demand from weaker industrial activity rather than only stronger competitiveness.
Serbia’s economy is therefore not weak, but it is becoming more dependent on domestic demand, services and fiscal support. Retail, wages and credit are doing more of the work that industry would normally be expected to share. That structure can sustain growth in the near term, particularly with inflation under control and public investment continuing. It also creates vulnerability. Consumption-led resilience is valuable, but it cannot fully replace export-oriented manufacturing, energy security and productivity growth.
The investment reading is clear. Serbia’s macro balance sheet remains credible, but the real economy needs a stronger industrial pulse. Growth near 3.0% is solid, yet its quality matters. A cycle driven by retail and services can keep headline GDP positive. A stronger investment case requires manufacturing normalisation, energy-sector clarity and more durable external demand from Europe’s industrial core.
