Serbian companies are increasing borrowing as European financing conditions become less favourable, with 75.8% of corporate bank loans still denominated in euros or euro-indexed.
Corporate lending grew by around 11.7% year on year in June 2026, with strong demand from SMEs and companies in construction, real estate and trade. Newly approved euro and euro-indexed corporate loans carried an average interest rate of about 5.1%. At the same time, the German 10-year Bund yield approached 3.25%, while markets began pricing more than 40 basis points of additional ECB tightening by the end of 2026.
This creates a potential mismatch for Serbia: the National Bank of Serbia could eventually reduce domestic interest rates while companies borrowing in euros continue to face higher financing costs.
Corporate lending remains euro-focused
Serbia has increased the use of dinar financing in parts of the banking system, particularly for households, but corporate borrowing remains strongly tied to the euro. Exporters often earn euros, investment equipment is frequently priced in euros, and foreign-owned companies generally prepare financial plans in the currency. Euro borrowing can therefore reduce currency risk for companies with euro revenues.
It also exposes borrowers to the ECB monetary cycle, EURIBOR and wider eurozone funding conditions. A company with €10 million of debt at 5.1% would pay roughly €510,000 in annual interest, excluding fees and principal. A further 100-basis-point increase would add approximately €100,000 a year.
Property and SMEs face financing pressure
Construction and real estate are particularly sensitive to borrowing costs because projects rely heavily on debt. Higher rates can reduce development margins, extend repayment periods and increase the amount of equity required. Commercial property valuations can also come under pressure as investors compare rental yields with rising European bond yields.
SMEs face another challenge. Around 65% of the quarterly increase in corporate lending has been linked to micro, small and medium-sized businesses, which generally have fewer alternatives to bank financing and often pay higher margins than large borrowers. Higher EURIBOR can therefore affect smaller companies through both the benchmark rate and their existing bank spread.
Exporters have protection, but not from higher rates
Companies generating euro revenues have a natural hedge against currency movements, but they remain exposed to interest-rate increases. Serbian automotive and industrial suppliers may be particularly vulnerable because higher debt costs can coincide with pressure from European customers to keep prices competitive.
This is occurring alongside rapid domestic wage growth. Average net wages increased 9.4% in real terms year on year in June 2026, while the minimum wage is set to rise again in 2027. Companies could consequently face higher labour and financing costs at the same time. Automation may help offset wage pressures, but purchasing machinery also requires capital, making investment decisions more sensitive to borrowing costs.
Banks and development lenders remain important
Higher rates can support Serbian banks because floating-rate corporate loans generate more interest income as benchmarks rise. However, excessive increases could eventually weaken credit demand and borrower quality. Serbia’s banking system currently has an NPL ratio of around 2%, providing a substantial buffer.
Corporate bonds offer another financing route, but the domestic market remains limited. Kodar sought to raise €50 million through a green bond carrying a 7% coupon, but demand reached only around €15.4 million. Development institutions such as the EBRD, EIB, CEB and World Bank could therefore become more important. The proposed €127.5 million EBRD package through Banca Intesa is one example of financing that can support corporate investment.
Renewable energy and infrastructure also face higher capital costs
Euro financing conditions are particularly relevant to Serbia’s renewable-energy pipeline. Wind, solar and battery projects require large upfront investments and depend on long-term cash flows. A 100-basis-point increase in debt costs can materially reduce project returns, potentially leading developers to increase equity, delay projects, renegotiate equipment prices or accept lower returns. Public infrastructure is also exposed because Serbia, state-owned companies and major projects use international and euro-denominated borrowing.
Serbia remains dependent on European rates
The scale of corporate euroisation limits the ability of domestic monetary policy to shield companies from external rate movements. With 75.8% of corporate lending denominated in or indexed to euros, the NBS can reduce dinar rates but cannot directly control EURIBOR or eurozone funding costs. Serbian companies could therefore enter 2027 with strong domestic demand, rising wages and rapidly expanding credit while facing higher capital costs for factories, property, renewable projects and working capital.
