Food prices, one of the main drivers of inflation on the domestic market, rose slightly at the beginning of the year despite margin caps, which some experts attribute to structural problems on the local market.
At the same time, food prices are under pressure from disruptions in global oil and fertiliser markets due to the conflict in the Middle East, leading experts to believe that inflation is inevitable, along with a risk of a simultaneous slowdown in economic activity.
How margin caps curbed inflation
Margin caps have partially managed to restrain inflation and limit food price growth, so the overall average annual increase in consumer prices in 2025 stood at 3.8%. Rudi Lukačić, an analyst at Bloomberg Adria, notes that inflation in Serbia remained elevated throughout 2025, hovering around 4%, with citizens feeling it daily through higher food and non-alcoholic beverage prices.
Food inflation peaked mid-year at close to 8% year-on-year, mainly due to adverse weather conditions and a weaker agricultural season. The effect of the government’s measure was swift: overall inflation fell below 3% and remained at its lowest levels since early 2025 between September 2025 and January 2026.
At the same time, inflation in food and non-alcoholic beverages slowed sharply from nearly 8% to almost zero, before turning negative in the last three months, reaching around -1% in January 2026.
A closer look at the components of the food and non-alcoholic beverages category shows that the largest contribution to price increases came from fruit, whose prices rose at double-digit rates during the year, peaking at nearly 40% year-on-year. This was followed by coffee, tea and cocoa, with growth of close to 30% in mid-2025, then vegetables at around 15%, and the category of sugar, jam and chocolate, which saw increases of nearly 20% at the start of the year. Non-alcoholic beverages rose at a steadier pace, around 10% for most of the year.
Poor weather conditions led to lower yields of fruit and vegetables, while coffee and cocoa prices increased on global commodity markets. It is important to note that these categories make up about 13% of the consumer basket in Serbia, which explains their relatively strong impact on overall inflation.
“After the introduction of margin caps in September, a sharp decline in almost all components of food and non-alcoholic beverages is visible. The most pronounced drop was in vegetable prices, which fell from about 13% to -18% in November, while fruit price growth slowed from around 30% to approximately 15%. Non-alcoholic beverages remained relatively stable, without significant changes,” Lukačić states.
Consumer prices of goods and services in January increased by 2.4% compared with the same month last year, and by 2.5% year-on-year in February.
Thanks to the Regulation on Margin Caps, food prices in January fell by 2.2% compared with January of the previous year. Fruit and nuts, which had previously driven inflation, rose by 9.2% in January, while vegetables, which had earlier had a strong inflationary effect, became 1.2% cheaper.
On an annual basis, food in February was 0.7% cheaper than a year earlier. Fruit rose significantly, by 13.7%, coffee by 11.7%, and non-alcoholic beverages by 5%. From March, the regulation no longer applies and prices are set freely.
Now a crisis from the Middle East looms
However, growing concern about potential inflation – and even stagflation, a combination of high inflation and slowing economic activity – is being driven by disruptions in global markets due to the conflict in the Middle East, which has complicated supply chains and pushed up raw material prices. Concerns are rising as the conflict with Iran continues, with problems spilling over into all sectors, including agriculture, where the availability and price of fuel, particularly diesel, and fertilisers are crucial.
Global food prices rose in March, driven by higher energy prices and increased transport costs linked to the war in the Middle East. The FAO Food Price Index averaged 128.5 points in March, up three points from February, according to Bloomberg.
Inflation and rising fuel prices: Vučić on the challenges
Serbian President Aleksandar Vučić said on Friday that the country had managed to keep inflation at 2.8% in March, according to preliminary data. “We are keeping it below 3%. Any increase in fuel prices would mean a dramatic and spiral rise in all other prices, especially consumer goods, but also all other energy sources in our country,” Vučić said.
Farmers have so far been granted a lower diesel price than other citizens, now paying 184 dinars per litre, three dinars more than previously.
According to him, prices have risen dramatically and fuel is becoming increasingly difficult to obtain, with supply shrinking – not only crude oil, but also refined petroleum products.
Over the weekend, he also announced the possibility of banning food exports if necessary.
Risks are growing as the conflict continues
Crude oil and fertiliser traders are already building risk premiums into prices and anticipating a potential rise in inflation, agro-analyst Žarko Galetin told Bloomberg Adria, adding that disruptions will affect the prices of food and other goods and services. “This creates an inflationary spiral that is not yet dramatic, but if the war continues, it could deepen,” he said.
Estimates suggest that around 30% of fertilisers, phosphate rock, sulphur and other key components pass through the Strait of Hormuz, which is effectively blocked due to the conflict with Iran. Serbia imports around 70% of its fertilisers, Galetin noted.
Professor Jelena Žarković from the Faculty of Economics also expects significant consequences in the food production sector, noting that food is being “hit from multiple sides”, including energy and fertiliser prices as well as rising transport costs. However, she believes Serbia still has a certain advantage, as it covers part of its needs through domestic production.
(Bloomberg Adria, 06.04.2026)
https://rs.bloombergadria.com/ekonomija/srbija/101090/cene-hrane-u-srbiji-i-inflacija/news