Raiffeisen sees Serbia’s growth holding up as inflation falls and external risks persist

Serbia’s economy appears to be sustaining a solid expansion into early 2026, according to Raiffeisen Bank Serbia’s latest assessment for April—an encouraging sign for investors even as the country continues to navigate a difficult external environment. The report links the momentum to domestic consumption recovery and ongoing capital spending, while noting that inflation is easing and monetary policy can gradually move toward a more neutral stance.

Growth supported by consumption and investment

The bank says real activity has remained resilient in early 2026. It attributes this performance to a growth model still anchored in consumption and capital expenditure, with public infrastructure projects and private-sector investment helping sustain momentum. While financial conditions are tighter than in earlier years, investment activity continues to provide support.

Disinflation broadens as policy shifts

Inflation has continued its downward trajectory after dominating the macroeconomic picture in 2022–2024. Price pressures have moderated markedly, reflecting both normalization in global commodity markets and the lagged effects of monetary tightening by the National Bank of Serbia. Food and energy—typically among the most volatile components—show clearer signs of stabilization, though services inflation remains more persistent, consistent with underlying demand strength.

As disinflation advances, Raiffeisen says monetary policy is moving toward greater neutrality. Although interest rates remain elevated in nominal terms, the tightening cycle appears to have peaked, with expectations gradually shifting toward cautious easing. The bank points to improving credit conditions—particularly for corporates—as an important transmission channel for investment financing.

External balance: trade deficit persists, exports matter

On external accounts, the report describes an adjustment process with structural features. The trade deficit remains present, driven by strong import demand tied to investment and consumption. Export performance provides partial offset, especially in manufacturing and energy-related segments.

Raiffeisen emphasizes that European demand continues to be pivotal for Serbia’s export trajectory, highlighting Germany and Italy as key determinants.

FDI helps fund imbalances

The bank also underscores foreign direct investment as central to financing the external imbalance. It characterizes FDI inflows as relatively stable, supported by Serbia’s role as a near-shore manufacturing hub within European supply chains. Industrial projects in automotive components and electronics remain prominent, alongside energy infrastructure investments that reinforce integration into regional production networks.

Tight labor market supports spending but raises costs

Labor conditions remain tight. Unemployment is at historically low levels, while wage growth continues to outpace inflation in real terms. Raiffeisen links this trend to continued support for consumption but warns it also creates cost pressures for employers—especially in labor-intensive sectors.

The report argues that productivity improvements will become increasingly important for sustaining competitiveness as wage convergence with EU markets accelerates.

Fiscal stance stable amid infrastructure commitments

Fiscal performance is described as broadly stable. Solid revenue collection and controlled expenditure growth have helped keep the fiscal deficit manageable. Public debt is said to be trending within sustainable ranges.

At the same time, ongoing capital spending commitments—particularly in transport and energy infrastructure—are expected to keep fiscal policy expansionary from a structural perspective.

Energy transition remains a key risk factor

Energy is flagged as a critical variable for the macroeconomic outlook. Serbia’s electricity system relies heavily on lignite and hydropower and faces structural challenges around reliability and transition requirements. Investments in renewables and grid modernization are gaining pace, but the system remains exposed to weather variability and regional market volatility.

Outlook: moderate growth with significant external headwinds

Looking ahead, Raiffeisen’s baseline outlook calls for continued moderate growth supported by easing inflation, stable financial conditions, and ongoing investment flows. However, it stresses that external risks remain significant: slower eurozone growth could weigh on exports; geopolitical uncertainties could add volatility; and fluctuations in global commodity markets could affect both prices and trade dynamics.

Overall, the report frames Serbia’s position as one of relative macroeconomic stability—underpinned by steady growth and improving price dynamics—but still dependent on external demand and capital inflows. The medium-term challenge is described as shifting toward a more balanced growth model that relies less on imports and more on domestic productivity gains.