Nuxt 3 - server-side: i18n switches back to default locale after setting locale

[githubnikola]

Node: 18.16.0
Nuxt: 3.4.3
@nuxtjs/i18n: 8.0.0-beta.7
@pinia/nuxt: 0.4.7
pinia: 2.0.33

Initial request comes with query param ?lang=sr. I want to set i18n to use this locale on server and that locale to persist on client.

i18n.config.mjs

import sr from '~/locales/sr_RS.json'
import hr from '~/locales/hr_HR.json'
import sl from '~/locales/sl_SI.json'

export default {
  locales: [
    { code: 'sr', iso: 'sr_RS' },
    { code: 'hr', iso: 'hr_HR' },
    { code: 'sl', iso: 'sl_SI' },
  ],
  locale: 'sr_RS',
  lazy: true,
  defaultLocale: 'sr_RS',
  fallbackLocale: 'sr_RS',
  messages: {
    sr_RS: sr,
    hr_HR: hr,
    sl_SI: sl
  }
}

nuxt.config.js

export default defineNuxtConfig({
  modules: ['@nuxtjs/i18n'],
  i18n: {
    vueI18n: './config/i18n.config.mjs'
  }
})

Now, I created plugin that runs only on server which uses store to load some app data among which is setting locale using await $i18n.setLocale(localeFromCustomCookie). Looking at the console using onBeforeLanguageSwitch i see that the locale changed but then it switches back to default.

What is the correct way to do this?

Thanks.