Serbia Economic Forecast

Year-on-year GDP growth accelerated in Q2 due to stronger fixed investment—buttressed by a sharp rebound in construction activity—and public spending. On the flip side, private consumption fell, and exports expanded at a lower rate. Turning to Q3, early data points to strengthening momentum. In July, industrial output grew at a faster pace relative to Q2, supported by softer cost pressures. Meanwhile, in the same month, inflation declined further, which likely contributed to a smaller decline in retail sales. In other news, in mid-August, President Vucic announced EUR 12 billion in public investment for infrastructure projects set to be completed by end-2026. Also in mid-August, Fitch affirmed the country’s ‘BB+’ rating with a stable outlook, citing a robust macroeconomic policy framework and a stronger external position thanks to easing energy sector pressures.

Inflation came in at 12.5% in July, down from June’s 13.7%. The decline was caused by softer price pressures for housing and utilities, transportation, and food. Inflation is seen falling further in the coming months on the back of tight monetary policy. Commodity price swings and the trajectory of monetary policy are key factors to watch.