Key Economic Trends in Serbia in H1 and Outlook for H2

The first half of 2026 saw Serbia maintain its economic growth trajectory, while also revealing clear signs that the economy is entering a new phase of development. Following several years of robust expansion supported by the post-pandemic recovery, strong investment activity and rising consumption, economic growth is moderating but remains resilient. Despite challenges arising from the external environment, including the slowdown of major European economies, geopolitical tensions and volatility in energy markets, Serbia continues to outperform many of its European peers. According to official data, GDP grew by 3.2% in the first quarter of 2026, driven by services and agriculture, while industrial output stagnated and construction activity declined.

Although the labour market remains relatively stable, employment declined slightly for the first time in several years. The employment rate fell to 50.7% in the first quarter of 2026, while the number of employed persons decreased by more than 50,000 compared to the same period of the previous year. At the same time, the unemployment rate remained unchanged at 8.9% compared to the fourth quarter of 2025.

Regarding inflation, the National Bank of Serbia expects average inflation to remain around 3.6% and remain within its target range of 3% ± 1.5%. Nevertheless, higher oil and commodity prices, coupled with the gradual withdrawal of certain price-control measures, may cause inflation to temporarily exceed the target range towards the end of 2026 and the beginning of 2027.

At the same time, public investment continues to play a crucial role in supporting economic growth. Large-scale infrastructure projects, investments in transport and energy infrastructure, and the acceleration of preparations for EXPO 2027 are contributing significantly to construction activity and overall economic performance. The investment cycle associated with EXPO 2027 is increasingly recognised as a key driver of Serbia’s economic development in the coming years.

On the other hand, industrial production and exports continue to face headwinds. The economic slowdown in Germany and other eurozone countries, Serbia’s most important export markets, has weakened external demand for domestic products. Industrial performance remains uneven, with sectors linked to the automotive industry and equipment manufacturing particularly affected by weaker economic activity across Europe. Foreign direct investment (FDI) trends warrant attention as well. Following a record year in 2024, when total FDI exceeded EUR 5 billion, inflows declined by 34% in 2025. Preliminary data for the first quarter of 2026 indicate a further year-on-year decline of approximately 52%. Looking ahead, the second half of 2026 is expected to bring continued economic growth, albeit at a moderate pace. The most relevant institutions forecast annual GDP growth of 2.8% to 3.2%.

The key question for Serbia in the years ahead is not whether economic growth will continue, but what will drive that growth. The development model that has largely relied on foreign direct investment, relatively competitive labour costs and large-scale infrastructure projects over the past decade is showing signs of maturing. As a result, the long-term sustainability of growth will increasingly depend on productivity improvements, technological advancement, innovation and the ability of domestic businesses to generate greater value added. This is likely to remain a defining theme in 2027 and beyond.

In this context, EXPO 2027 represents a significant development opportunity but is not, in itself, a long-term solution. If the investment cycle associated with the event is leveraged to improve infrastructure, enhance competitiveness and attract higher-quality investments, Serbia can maintain its position as one of the fastest-growing economies in the region. Otherwise, once this investment-driven momentum subsides, identifying a new and sustainable growth model will become one of the country’s most important economic priorities in the decade ahead.