Borrowing costs for Serbian companies increased as corporate credit expanded, while the European Central Bank (ECB) resumed monetary tightening, creating an additional potential source of pressure for euro-linked financing. The average rate on newly approved euro and euro-indexed corporate loans rose to about 5.5%, compared with approximately 5.2% previously and 5.1% before that.
New dinar-denominated corporate loans also became more expensive, with the average rate reaching about 7.7%, up from around 7.4% and 7.1% in the preceding periods. The increase comes as Serbian companies are taking on more credit. Corporate lending was growing at double-digit year-on-year rates, while investment loans were expanding faster than lending for liquidity and working capital.
Euro financing faces additional monetary-policy pressure
Euro-linked borrowing remains important for Serbian corporate investment, including machinery, industrial expansion, commercial property, renewable energy and other capital-intensive projects. The ECB raised its three key interest rates by 25 basis points, taking the deposit facility rate to 2.50%, the main refinancing rate to 2.65% and the marginal lending facility to 2.90%. Companies with floating-rate euro financing may face further pressure as European money-market benchmarks adjust and banks reprice new loans.
The National Bank of Serbia (NBS) maintained its key policy rate at 5.75%, while inflation remained within its target range. The differing monetary-policy positions leave Serbian companies exposed to higher European funding costs even as domestic monetary conditions allow the NBS to keep its benchmark unchanged.
Higher financing costs affect capital-intensive investment
The change in borrowing costs comes as Serbia enters a period of increased capital expenditure. Manufacturers are investing in automation, additional production capacity and energy efficiency, while exporters are spending on decarbonisation, environmental compliance and production modernisation. Renewable-energy developers require long-term project financing, and infrastructure and commercial developments also depend heavily on bank lending. Even a few tenths of a percentage point can become significant on large loans with long maturities. For a manufacturer financing a multi-million-euro factory expansion, higher interest expenses can reduce project returns, extend payback periods and lower the debt amount that a project can support.
Renewable-energy projects face a similar effect because financing costs directly influence required power prices and investment returns. Smaller companies can be particularly affected because they generally have less negotiating leverage with banks and fewer alternatives to conventional lending.
Banking system remains liquid and well capitalised
Serbia is entering the period of higher borrowing costs with a banking sector that remains highly liquid and well capitalised, while credit quality has remained comparatively strong. The increase in lending rates therefore reflects primarily a change in the price of capital, rather than a shortage of banking liquidity or broad financial stress. Companies may continue to obtain financing, but investment projects need to generate higher returns to justify increased borrowing costs.
The financing environment can consequently differ between borrowers. Large exporters with euro revenues, strong balance sheets and established banking relationships can negotiate lending terms from a stronger position, while companies with weaker cash flows, limited collateral or mainly dinar revenues can face more difficult conditions. Development-bank programmes, green-finance facilities, guarantees and blended financing could become more important sources of funding for industrial investment.
Lending data will show whether repricing continues
The latest figures alone do not establish a persistent upward trend in corporate borrowing rates. Serbian lending rates remain below some of the levels recorded earlier in the monetary tightening cycle, while monthly averages can also change because of differences in the composition and volume of newly approved loans. The movement from 5.1% to 5.5% for euro and euro-indexed corporate loans, and from 7.1% to 7.7% for dinar loans, indicates higher financing costs across both major corporate lending categories. The next lending data will indicate whether the increase primarily reflected changes in the composition of new lending or marked a broader repricing of Serbian corporate credit.
