The World Bank has projected that Serbia’s economic growth will accelerate to over 3% in 2026, driven by a resurgence in key industrial sectors, including oil and automotive, alongside strong export performance. This forecast comes as Serbia experiences a revival in its oil sector and increased production at Stellantis (FIAT), coupled with a rebound in the services sector. The World Bank’s report highlights that these developments are crucial in boosting the country’s economic outlook.

Despite the positive growth forecast, the World Bank has identified significant risks that could impact Serbia’s economic trajectory. One of the main concerns is the high youth unemployment rate, which remains at 22%. This figure underscores a persistent mismatch between the skills possessed by young people and those demanded by the job market, indicating limited employment opportunities for this demographic. Additionally, the overall unemployment rate has decreased to 7.2%, although this reduction is partly attributed to a shift from unemployment to inactivity rather than a substantial increase in employment.

The fiscal deficit in Serbia is projected to rise to 3.5% of GDP, primarily due to increased public spending on wages, pensions, and capital investments. However, the public debt is expected to continue its downward trend. The World Bank emphasizes the need for structural reforms to sustain economic growth and transition towards a fully market-oriented economy that aligns with European Union standards. These reforms are deemed essential for fostering an innovative and inclusive economy that provides quality and productive jobs while supporting private sector growth.

The report also highlights the role of the services sector as a primary driver of production, with early signs of recovery in construction and minimal contributions from industrial production. The World Bank’s office in Serbia, led by Director Aisha Williams, has reiterated the importance of structural reforms to attract private capital necessary for future growth. Williams stated that building a robust economic environment with improved institutions and business conditions could draw more private investment, which is crucial for sustaining growth.

Looking ahead, the World Bank anticipates that Serbia’s economy will grow at a rate of 3-4% in the medium term, driven mainly by consumption and, to a lesser extent, investments. However, the report warns of significant negative risks that could affect the country’s economic prospects. These include ongoing issues with large state-owned enterprises, limited progress in implementing structural reforms, and uncertainties on both the global and domestic fronts.

To mitigate these risks and support continued economic growth, the World Bank suggests targeted social assistance programs, care for people with disabilities and the elderly, and job search and training programs. These initiatives are expected to complement macroeconomic progress and contribute to poverty reduction.

In summary, while Serbia’s economic outlook for 2026 appears optimistic with expected growth driven by key industrial sectors, the World Bank’s report underscores the necessity of structural reforms and addressing youth unemployment to ensure sustainable development. The challenges posed by large state-owned enterprises and the need for a more market-oriented economy remain critical areas for Serbia to address in its pursuit of long-term economic stability.