Serbia’s current-account deficit narrowed to approximately €560 million in the first five months of 2026, down from around €1.8 billion recorded during the same period a year earlier, reducing the country’s external financing needs and easing pressure on its balance of payments.
The improvement means Serbia required less support from foreign direct investment, external borrowing and foreign-exchange reserves to maintain international payment stability. The smaller gap also provides additional support for the country’s managed exchange-rate framework.
Goods deficit remains the main external challenge
Despite the overall improvement, merchandise trade continued to represent the largest structural weakness in Serbia’s external position. The country recorded a goods-trade deficit in every month from January to May 2026.
Exports increased significantly during several months, but imports remained elevated due to continued demand for consumer products, industrial equipment, energy supplies and imported components used in domestic production.
The services sector provided the strongest offset to the goods imbalance. Serbia recorded a services surplus throughout the period, supported by ICT services, business services, transport, tourism and other export-oriented activities. Additional support came from secondary income flows, including remittances and other transfers, which contributed to the stability of the external accounts.
Foreign-owned assets continue to drive income outflows
The primary-income account remained in deficit during the period, reflecting Serbia’s accumulated stock of foreign-owned assets and external liabilities. Payments related to profit repatriation, interest expenses and other investment income outflows continue to represent a significant external obligation. The increase in foreign investment over previous years has expanded productive capacity, but it has also created future payment flows that must be covered through export earnings, reinvested profits or additional capital inflows.
Growth and external balance improve simultaneously
The reduction in the current-account deficit coincided with stronger economic activity. Serbia’s real GDP increased 3.2% year on year in the first quarter of 2026, compared with 1.8% growth in the first quarter of 2025.
The combination of economic expansion and a stronger external balance represents a different pattern from improvements caused by weaker demand and declining imports. Future developments will depend on several factors, including energy costs, industrial investment and household credit growth. A stronger investment cycle could increase imports of machinery, equipment and production materials, while expanding consumer lending could raise demand for imported vehicles, electronics and other goods.
Foreign reserves provide additional protection
Serbia entered the period with a significant foreign-exchange buffer. The National Bank of Serbia’s foreign-exchange reserves stood at €29.61 billion in June 2026. The reserve position provides protection against temporary external shocks, although reserves serve primarily as a financial buffer rather than a replacement for stronger export competitiveness. The improvement in the current account reduces short-term pressure on Serbia’s external financing position and the dinar exchange rate. The longer-term challenge remains increasing domestic value added in exports, expanding service-sector revenues and reducing dependence on imported energy and equipment through productive investment.
