Fiscal Council: Budget Deficit Rises to 3.5% of GDP
The 2026 budget rebalance lifts Serbia's deficit from 3 percent to 3.5 percent of GDP, an increase of 59 billion dinars, the Fiscal Council warned as parliament opened debate on the rebalance.
Serbia’s Fiscal Council said on August 24 that the 2026 budget rebalance raises the planned deficit of the republican budget from 3 percent to 3.5 percent of gross domestic product, an increase of 59 billion dinars (about 503 million euros). The Council published its assessment the same day the National Assembly opened debate on the same rebalance at an extraordinary session, the first of 59 items on the agenda.
By the Fiscal Council’s calculation, without the rebalance this year’s deficit would have come in between 2 and 2.5 percent of GDP. Seen from that angle, the rebalance worsens the fiscal result by more than one percentage point, not the half a point that would follow from comparing it only to the previously planned 3 percent.
“Fiscal expansion of this kind would be economically justified in the event of a sharp downturn in economic activity.”
That is how the Fiscal Council, in its assessment of the rebalance proposal, explains why it sees no economic case for raising this year’s deficit. Economic growth is close to its potential, and the government recently raised its 2026 growth forecast from 3 percent to 3.3 percent. The Council warns that stimulating demand further under these conditions does not add to growth, but instead adds to inflationary pressure.
Why the deficit figures differ
Sources disagree on the starting point from which the deficit is measured. The Fiscal Council’s written assessment counts the increase as running from 3 percent to 3.5 percent of GDP. Nikola Altiparmakov, a member of the same Council, gave a different range at a session of the parliamentary Finance Committee, from 2.5 percent to 3.5 percent. Altiparmakov also said the rebalance does not pose an immediate macroeconomic risk, since spending typically is not executed in full, so the actual deficit could end up closer to 3 percent of GDP than to the planned 3.5 percent.
Budget expenditures are rising by about 172 billion dinars (1.47 billion euros), and revenues by 112.5 billion dinars (959 million euros). The single largest cost is one time payments to citizens, close to 100 billion dinars (853 million euros). Defense spending is rising by 41 billion dinars (350 million euros), and subsidies to the state road company by 22 billion dinars (188 million euros). At the same time, capital spending by the republic in other areas is being cut by about 20 billion dinars (171 million euros).
On the revenue side, about 80 billion dinars (682 million euros) comes from non tax sources, namely profits of state owned companies and dividends from the National Bank of Serbia. The Fiscal Council describes these inflows as volatile and says their origin is not shown with enough transparency in the explanation accompanying the rebalance. At the same time, lower excise duties on petroleum products are cutting revenue by about 30 billion dinars (256 million euros), while value added tax revenue through July is up 10 percent from the same period last year, above the previously planned 8.2 percent.
The Council’s assessment also states that the rebalance, like earlier ones, was drafted and adopted with insufficient transparency and very short deadlines, and it projects public debt will stay below 45 percent of GDP at the end of 2026.
Agriculture committee fast tracked its part
The National Assembly’s Committee on Agriculture, Forestry and Water Management adopted the agriculture related portion of the rebalance the same day, under urgent procedure and without debate, so it would reach the Ministry of Finance before the plenary session began. Committee chairman Marijan Risticevic did not give the floor to lawmaker Miroslav Aleksic to speak about the rebalance, saying Aleksic had registered to speak too late.
“The authorities have destroyed agriculture and rural Serbia, and Serbia has become a net importer of food.”
Said Aleksic, a lawmaker of the People’s Movement of Serbia, at the committee session, adding that crop prices are low and that Serbia’s farmers cannot compete even with producers from Albania.
This paper has previously reported on the size of the aid the rebalance brings to citizens. The Fiscal Council’s assessment now puts, for the first time, a number on the other side of that ledger: how much that aid, together with the other new spending, costs in additional deficit, and what pressure that puts on inflation in a year ahead of parliamentary elections.
