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Economic growth in Serbia is projected to slow to 2.2% in 2025 amid weaker confidence, declining investment and a widening external deficit, before rebounding to 3.3% in 2026 and strengthening further to 4.2% in 2027 as large-scale public investment under the “Leap to the Future – Serbia 2027” programme and EXPO 2027 boost domestic demand. Inflation is forecast at around 4% in 2025 and to remain elevated over the forecast horizon, while the general government deficit is projected to stay at 3% of GDP in 2025-27. Despite persistent deficits, gross public debt is expected to decline slightly as a share of GDP, reaching about 46.5% by 2027, supported by strong nominal growth.
| Indicators | 2025 | 2026 | 2027 |
|---|---|---|---|
| GDP growth (%, yoy) | 2.2 | 3.3 | 4.2 |
| Inflation (%, yoy) | 4.0 | 4.1 | 3.7 |
| Unemployment (%) | 8.9 | 8.7 | 8.6 |
| General government balance (% of GDP) | -3.0 | -3.0 | -3.0 |
| Gross public debt (% of GDP) | 47.7 | 47.3 | 46.5 |
| Current account balance (% of GDP) | -5.3 | -6.1 | -5.2 |
Domestic demand stimulated by the government
Economic growth slowed in the first half of 2025 amid weaker confidence, lower FDI inflows and declining investment, while imports outpaced exports, widening the current account deficit. Short-term indicators point to continued modest activity for the remainder of 2025, and annual GDP growth is forecast at 2.2%. Over 2026-27, growth is projected to accelerate as major public works boost investment under the “Leap to the Future – Serbia 2027” programme and EXPO 2027, with expected strong tourist inflows in 2027 supporting services exports. Household consumption is projected to regain momentum as strong wage growth is complemented by planned increases in pensions and minimum wages, though imports are expected to outpace exports given strong domestic demand.
Wage growth to remain elevated
The labour market softened in early 2025, with employment declining slightly and unemployment rising, while wages continued to increase robustly and well above inflation. Wage growth is projected to moderate from the 2025 peak as inflationary pressures ease, but to remain elevated due to persistent labour shortages and planned minimum wage hikes. Employment is expected to grow only slowly as labour supply tightens, while unemployment is forecast to decrease only marginally over 2026-27.
Inflation pushed down by one-off measures
Inflation declined into mid-2025 but rebounded during the summer, driven mainly by higher food prices, before slowing sharply in September due to a temporary retail margin cap. Overall inflation is forecast to average around 4% in 2025 and to remain elevated in 2026 as the margin cap expires and income growth remains strong, boosted by pension and minimum wage hikes. In 2027, large EXPO-related tourism inflows are expected to keep inflation relatively high, even as other price drivers ease.
Relaxed deficit target boosts expenditures
General government revenues grew in early 2025, but expenditure increased faster, driven by subsidies, pensions and capital investment. The budget deficit is projected to rise to 3% of GDP in 2025 and to remain at this level in 2026-27 in line with the relaxed fiscal target agreed with the IMF, reflecting investment needs for EXPO 2027 and higher pension spending. Despite persistent deficits, public debt is projected to decline slightly as a share of GDP thanks to strong nominal growth, though downside risks include higher-than-planned spending amid domestic turbulence and potential fiscal impacts linked to sanctions on the oil company NIS.
Source: European Commission. European Economic Forecast, Autumn 2025.
