Serbia

Serbia is an upper-middle-income country situated at the crossroads of Central and Southeast Europe, in the central part of the Balkan Peninsula. It is the largest economy in the Western Balkans.

Serbia’s economic growth is likely to exceed 3% in 2026 following a weaker growth performance in 2025. This year’s growth has reflected primarily a recovery in consumption thanks to a slowdown in inflation and strong household loan growth. A positive contribution of exports stemmed from the strong performance of the automotive sector.

On the production side, the services sector was the only significant driver of economic activity. The construction sector has started to recover, but manufacturing had only a marginally positive contribution to growth.

The strong fiscal performance from the past several years changed somewhat in 2026. Revenues were impacted by the government’s decision to lower excises on fuel, which together with the increase in transfers to households and subsidies, led to a higher-than-expected fiscal deficit.

Domestic political uncertainty has disrupted policy dialog and implementation of key structural reforms although there was progress with legislative changes related to energy, financial sector and public finance management. Early elections are scheduled for October 2026.

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Serbia’s economic growth is expected to quicken to more than 3% in 2026, after losing momentum in 2025. This year’s rebound follows a restart of production of the oil refinery and operations of the Stellantis (FIAT) factory, offsetting a continued weak performance of foreign direct investment (FDI) in H1 2026 and the impact of weather-related events on agriculture and electricity production. A notable positive development was the pickup in exports largely led by higher exports of cars and metals.

Recovery of private consumption was driven by slowing inflation, strong expansion of loans, and a nominal 11.5% wage growth in H1 2026. The unemployment rate fell to 7.2% at the end of Q2 as unemployed move to inactivity, but youth unemployment stood higher at 22% due to skills mismatches and limited job opportunities. The incidence of poverty is seen falling to 7.4% in 2026 from 7.9% in 2025.

Government revenue collection increased by 11.8% in nominal terms in H1 2026, while expenditures increased by 13.3% driven by higher spending on wages, pensions, and capital expenditures. The supplementary budget for 2026 envisages an increase in the fiscal deficit of the central government to 3.5% of GDP from 2.9% of GDP.

Serbia’s economy is expected to grow at around 3-4% over the medium term, driven mainly by consumption and, to some extent, by investment. Downside risks include continued problems of large state-owned enterprises (SOEs), the lack of progress in the next stage of structural reforms, and global and domestic uncertainty. Inflation is expected to increase slightly in the second half of 2026 but is projected to stay within the target range. Fiscal performance in 2026, while now expected to be weaker at the central level due to increased expenditures and widening of the deficit to 3.5%, should remain broadly in check.

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The World Bank Group's program for Serbia, guided by the FY22-26 Country Partnership Framework, involves around $1billion in loans across the public and private sectors.

The program offers policy advice and financing in areas such as transport (railways and local roads); real estate management/business environment; R&D and innovation; competitive agriculture; health system effectiveness; capital market development; public sector efficiency (including digitalization of selected public services and tax modernization); improvements in energy efficiency, infrastructure development and broader sector reforms; and primary education.

To facilitate economic integration, the World Bank Group is also supporting two regional projects that (1) improve connectivity along the Drina and Sava River corridors and (2) enhance trade and transport in the Western Balkans.

A key area of the World Bank Group's engagement is supporting Serbia's transition toward a cleaner, more resilient, and sustainable energy sector. The Scaling Up Residential Clean Energy (SURCE) Project supports energy efficiency improvements and adoption of clean heating technologies in households, helping reduce air pollution, lower energy consumption, and decrease greenhouse gas emissions. The project has generated strong demand from citizens across Serbia and is helping households improve comfort, reduce energy costs, and accelerate the country's progress toward its climate and energy transition objectives, while strengthening the institutional framework for scaling up residential energy efficiency investments.

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The World Bank Group's program for Serbia is guided by the Country Partnership Framework (CPF) for FY22-26, approved in May 2022 and extended through FY27. The CPF's goal is to support the country's efforts to strengthen its institutions, which will accelerate economic growth in a fiscally, environmentally sustainable manner and promote more inclusive service delivery.

The World Bank Group's engagement in Serbia focuses on strengthening institutions, supporting sustainable and resilient growth, improving competitiveness and connectivity, and enhancing human capital outcomes.

Through a One World Bank Group approach, the World Bank supports policy reforms and public investments, while the International Finance Corporation (IFC) provides investment and advisory services to promote private sector development and mobilize private capital. The Multilateral Investment Guarantee Agency (MIGA) complements these efforts through political risk insurance and credit enhancement instruments that help attract foreign investment and support strategic private sector projects. Together, the three institutions work to maximize development impact by leveraging public and private financing to advance Serbia's development priorities. The World Bank Group’s current portfolio for Serbia is $1.6 billion across both the World Bank and IFC.

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