The success of fiscal policy cannot be reduced solely to the size of the budget deficit and public debt, according to the Fiscal Council’s assessment of the Fiscal Strategy for 2027. As the Council notes, “the broader purpose of public finances is to enable the achievement of the most important social objectives, from quality education, healthcare and infrastructure to social security and long-term economic development”.
According to the assessment, the Strategy’s greatest strength is that it “keeps public finances stable and at a sustainable level”.
The Council points out that this is particularly important at a time when major economic and political uncertainties have become the new reality, ranging from wars and trade conflicts to energy and climate shocks. In this context, it considers it positive that the Strategy envisages a fiscal deficit of 3 per cent of GDP in 2026 and 2027, falling to 2.5 per cent in the period 2028–2029. Combined with expected economic growth, this would gradually reduce public debt from 44.7 per cent of GDP at the end of 2025 to 43.9 per cent by the end of 2029. According to the Council, such levels are sustainable and provide the state with sufficient fiscal space to respond quickly in the event of crises or unforeseen disruptions.
A solid document, but no solutions to the problems
The Fiscal Council considers the Strategy to be a competently prepared document. Nevertheless, it argues that its credibility weakens when moving from broad quantitative indicators to concrete policies. According to the Council, “the Strategy is far more convincing as a document confirming the Government’s commitment to fiscal stability than as a document offering a clear plan for solving Serbia’s key development challenges”.
The Strategy forecasts average economic growth of 3.9 per cent, with a temporary acceleration to 4.5 per cent in 2027 due to the hosting of EXPO 2027. Inflation is expected to remain moderately elevated at 4.2 per cent in 2027 before declining to the midpoint of the National Bank of Serbia’s target range of 3 per cent by 2029. The Council notes that achieving the projected growth rate of 4.5 per cent in 2027 will depend heavily on whether the estimated economic effects of EXPO 2027 prove realistic.
One positive development is that the Strategy explicitly presents, for the first time, the estimated contribution of EXPO 2027 to economic growth. The total impact is estimated at 1.5 percentage points and is expected to come from direct effects on tourism and hospitality, indirect effects generated by increased demand, and induced effects stemming from stronger demand for domestic inputs and supply-chain activity.
However, the Strategy does not provide the detailed assumptions or analyses behind these calculations, making it impossible to independently assess their reliability.
Departure of foreign investors increases unemployment
The Fiscal Council warns that structural changes in employment trends mean that continued employment growth can no longer be assumed in the medium term. After years of rising employment, 2025 recorded the first decline since 2014.
According to the Labour Force Survey, employment fell by approximately 1 per cent.
The Council notes that these negative trends continued and deepened during the first quarter of 2026. The sharpest decline occurred in Southern and Eastern Serbia, where average wages are considerably lower than elsewhere in the country. Employment also fell in traditional low-value-added industries. The most likely explanation, according to the Council, is that wages have been growing faster than productivity for several years. In practical terms, companies – primarily foreign ones – that had benefited from extensive state subsidies over nearly two decades are now gradually shutting down operations and leaving Serbia.
EPS loans as a risk to public debt
The principal risks to the projected path of public debt stem from the energy sector. These include planned state guarantees for energy-transition projects and possible expenditures related to resolving the ownership structure of NIS.
The Strategy envisages extensive guarantees for domestic energy companies, including EPS, Srbijagas, EDS and Transnafta. EPS is by far the largest beneficiary, with four projects worth a combined 292.4 billion dinars, approximately €2.5 billion, accounting for around 70 per cent of all announced guarantees. Although these loans would automatically become part of public debt once state guarantees are issued, they are not included in the official public debt projections presented in the Fiscal Strategy.
NIS as an additional problem
Another significant risk to public debt concerns the ownership structure of NIS.
The Council recalls that the Government included a provision in the 2026 Budget Law permitting additional borrowing of 164 billion dinars, or approximately €1.4 billion, if the state is forced to acquire an ownership stake in the company following unsuccessful negotiations.
If such a scenario materialises, Serbia’s public debt would increase. While the transaction itself would not affect the fiscal deficit, as it would be recorded below the budget balance line, it would nevertheless increase overall debt levels.
Infrastructure far more expensive than planned
The Fiscal Council’s analysis shows that the costs of major infrastructure projects consistently exceed initial estimates. Examining eight major road projects, the Council found that their total costs were on average between 75 and 80 per cent higher than originally planned.
This is particularly important given the rapidly approaching deadlines for major projects, especially the EXPO complex and related infrastructure. The Council therefore does not exclude the possibility that additional budgetary resources will be required within the next one or two years to compensate for delays and meet existing commitments.
Lack of transparency in public investment planning
The Fiscal Council again highlights the need for greater transparency in the planning and monitoring of public investments. While the Strategy emphasises the positive impact of public investment on growth and development, it devotes considerably less attention to costs, economic justification and associated fiscal risks.
The Council notes that Serbia still lacks the seven-year public investment plan envisaged by the 2018 Planning System Law. Instead, investment policy continues to be conducted through fragmented programmes and initiatives managed by different state institutions. Although EXPO 2027 and the broader Leap into the Future – Serbia 2027 programme account for a substantial share of planned investments, the Strategy still fails to provide a clear sectoral breakdown of spending.
Rather than presenting a transparent and quantified overview of investments, the document largely lists priority sectors, effectively covering almost every area in which the state invests. As a result, the public lacks reliable information about the Government’s true priorities, making it impossible to independently assess whether the medium-term investment plan reflects Serbia’s actual needs.
EXPO will cost €3.4 billion
As the exhibition approaches, the total cost of EXPO 2027 and associated projects is becoming clearer and could reach approximately €3.4 billion. According to the Fiscal Council, calculating the full cost is difficult because expenditures are spread across numerous budget lines and implemented by various state bodies. Budget execution data for 2023–2025 show that by the beginning of 2026 the state had already spent approximately €1.25 billion on EXPO 2027 itself, mainly through the Ministry of Finance.
Related infrastructure projects have absorbed an additional €750 million through the Ministry of Finance and the Ministry of Transport, including the National Stadium, associated infrastructure and the railway connecting Zemun Polje with the stadium. By the end of 2025, total spending had therefore reached approximately €2 billion.
The current budget reserve remains a problem
The Fiscal Council also points to the extensive use of the current budget reserve, which provides Serbia’s budget with a relatively high degree of flexibility. According to the Council, the reserve has gradually evolved from a mechanism intended for crisis management into a tool for financing public policies and expenditures outside the normal parliamentary budget process.
The Council notes that although the June 2025 Fiscal Strategy announced measures to improve transparency in this area, those proposals were removed from the revised version published later that year. The issue is absent once again from the 2027–2029 Strategy. Consequently, another opportunity has been missed to strengthen the regulatory framework, improve transparency and reduce the scope for discretionary spending of public funds.
(Forbes Serbia, 09.06.2026)