In 2026 Serbia expects moderate economic growth of 2,7 percent, which represents a downward revision due to constant external challenges, while inflation, fueled by energy prices on the international market, is likely to record a temporary jump to around six percent by the end of the year, according to the latest World Bank (WB) projections. writes Aleksandra Nenadović for New Economy.
GDP and economic growth: The impact of global uncertainty
Economy Serbia shares the fate of a region that is facing a slowdown in growth, according to SB economists. Although Serbia has shown resilience, growth projections for 2026 have been corrected to 2,7 percent due to smaller private investments and weaker exports. The key factors hindering faster progress are the conflicts in the Middle East and the economic situation in the European Union, which is Serbia's main trading partner. Within the country, agriculture remains a high-risk sector due to climate change, while the automotive industry, led by the Stellantis factory in Kragujevac, represents one of the brighter spots in industrial production.
"Slow growth in the Eurozone, especially in countries like Germany, Italy and France, directly affects Serbia through reduced demand for exports and less investment inflows." A particular problem is that they domestic private investment for many years, significantly lower compared to the countries of the region and Eastern Europe, which further emphasizes Serbia's dependence on foreign capital for faster economic growth", said macroeconomist for Serbia at the World Bank, Lazar Šestović, at the presentation of the latest World Bank projections.
Inflation: Energy pressures and administrative measures
After a period of high inflation in 2023, administrative measures to limit retail margins led to a temporary drop in inflation to a level of 2,5 to 3 percent in early 2026. However, experts warn that inflation will rise again to just over six percent by the end of 2026. The main source of this pressure is oil and derivative prices, as well as imported energy, which directly affects domestic prices and production costs.
"The main risks for inflation in Serbia in 2026 are the prices of energy products on the international market. This has been identified as the primary risk factor, because energy products (fuel, electricity and gas) currently account for about two-thirds of the total inflation in the country. Any increase in oil prices is directly and quickly reflected on the domestic market and inflation. Projections are based on the assumption that the average price of oil will be around 90 dollars per barrel, but the markets are extremely unstable and subject to sudden changes." says Šestović.
As he said, Serbia has a significant share of agriculture in the economy, and bad seasons caused by droughts or natural disasters regularly push food prices up. It often happens that yields do not match average expectations, which forces the country to import more and negatively affects the trade balance. According to Šestović, large companies such as EPS and NIS have proven to be very sensitive to energy crises in the past, so risks to inflation include their ability to procure energy at stable prices and the potential impact of their pricing policy on overall domestic inflation.
Fiscal stability as a support
Serbia has traditionally had a high inflow of foreign direct investments (FDI), often above five or six percent of GDP, says Šestović. However, in 2025 and the beginning of 2026, a significant drop in FDI was recorded, which made it difficult to finance the deficit of current transactions. Due to the lower inflow of foreign capital, the government had to borrow more abroad, which affects the external debt, although foreign exchange reserves still remain at a record high level. An additional challenge is the low rate of domestic private investment, which has been below the regional average for years.
Despite the crises, the fiscal situation in Serbia remains relatively stable. The budget deficit in 2025 was smaller than expected (2,4 percent of GDP), and the public debt fell to below 44 percent of GDP at the beginning of 2026, according to SB economists. Nevertheless, the continuation of the conflict in the Middle East and the need to import expensive energy products remain the main risks that could burden the budget in the coming period.
Labor market and employment
After a series of successful years, the employment growth trend has been interrupted, and the unemployment rate has started to rise slightly from the end of 2025, says Šestović. A special problem is the aging of the population, because it is expected that Serbia will soon become a "super-old" society with over 20 percent of the population over 65 years old.
The SB report emphasizes that Serbia has a huge "untapped human potential", especially among women and young people. If reforms were implemented that would make it easier for them to enter the labor market — such as better access to childcare and a reduction in the tax burden for low-wage workers — it could significantly accelerate annual GDP growth.
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