World Bank forecasts Serbia’s economy to grow over 3%

Serbia’s economy is expected to grow by more than 3% in 2026, driven by the restart of key industrial activities, strong export performance, and recovery in the services sector, according to a report released by the World Bank. The growth forecast reflects a broad-based uptick across multiple sectors following a period of economic disruption.

“This year’s recovery in Serbia’s growth and solid macroeconomic results provide reasons for cautious optimism,” said Ajša Vilijams, director of the World Bank Group office in Serbia. “Our analyses often emphasize the need for more structural reforms in Serbia to support the transition toward a fully market-oriented economy aligned with EU standards.” She also noted that Serbia should aim to build an innovative and inclusive economy that creates quality, productive jobs and enables successful private sector operations. Such an economy, supported by stronger institutions and improved business conditions, would attract more private investment needed for future growth.

The report highlights that restarting production in the oil refining and automotive sectors contributed significantly to the projected growth. The sole oil refinery resumed operations, while carmaker Stellantis (FIAT) saw increased output. Services also rebounded strongly, helping offset slower performance in construction and industrial production, which showed only minimal gains.

Unemployment dropped to 7.2%, partly due to people leaving the labor force rather than finding jobs, according to the World Bank. Youth unemployment remains high at 22%, pointing to a mismatch between workers’ skills and labor market demands.

The government’s fiscal deficit is projected to rise to 3.5% of GDP in 2026, fueled by higher spending on wages, pensions, and capital investments.

Bridging the Development Gap

To close the income gap with Central European peers like Slovakia, the Czech Republic, and Poland, Serbia needs not just faster growth but systemic improvements in productivity, investment, and job quality. GDP per capita at purchasing power parity was around $33,900 in Serbia in 2025, compared to $49,300 in Slovakia, $54,300 in Poland, and $60,500 in the Czech Republic.

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If Serbia grows at 3% annually while its neighbors expand at 2%, closing the current gap would take decades. At 6% annual growth—a rate seen previously between 2000 and 2008 and again in 2021—Serbia could match today’s levels of Slovakia in about a decade, Poland in roughly 12 years, and the Czech Republic in around 15 years.

Achieving sustained 6% growth would require expanding production capacity, attracting private investment, upgrading technology, and shifting employment toward higher-productivity sectors. The World Bank notes that structural reforms, stronger institutions, and improved business conditions remain essential for long-term convergence.

Risks and Structural Challenges

Growth risks remain tied to the performance of large state-owned enterprises and limited progress on structural reforms, the World Bank noted. Halfway through 2026, consumption continued to lead growth, supported by easing inflation and strong household credit expansion. However, this demand-driven momentum may not be sustainable without stronger investment and productivity gains.

Services remained the primary driver on the production side, while construction showed early signs of recovery. Industrial production contributed only marginally to overall growth. The World Bank emphasized that reducing poverty in the coming years will depend not only on macroeconomic performance but also on targeted social assistance, care for persons with disabilities and the elderly, and active labor market programs.

Why Faster Growth Alone Is Not Enough

Sustaining 6% growth requires more than temporary boosts from resumed production or export demand. It demands expanding productive capacity, improving organizational efficiency, and ensuring that employment shifts toward higher-value activities. Without these deeper changes, short-term gains risk stalling once external conditions normalize.

Differentiating between total GDP growth and GDP per capita growth is critical. A rising population or changing employment structure can distort per capita figures. The World Bank’s comparisons with Slovakia, Poland, and the Czech Republic rely on consistent methodology and identical indicators to ensure accuracy. For Serbia, matching these economies over time means building an export-oriented, innovation-driven model that attracts long-term private investment.