Serbia reduced its current-account deficit during the first seven months of 2026, supported by stronger exports and higher remittances, but payments of income to foreign investors increased significantly. The contrasting movements reflect the growing impact of profits generated by foreign-owned businesses on the country’s external accounts.
The current-account deficit narrowed to EUR 1.90 billion, down 11.7% year on year. The merchandise trade deficit also improved, as exports expanded faster than imports, while transfers from Serbian workers abroad provided additional support.
Foreign Investment Profits Increase Income Outflows
Despite the improvement in trade and transfers, Serbia’s primary-income deficit widened to EUR 3.36 billion. The main contributor was income generated by foreign direct investment, with net outflows from direct-investment income reaching EUR 2.86 billion, an annual increase of 25.7%.
Net dividend payments to foreign owners climbed to EUR 1.91 billion, almost 89% higher than in the same period a year earlier. These payments do not necessarily indicate poor investment performance. Dividend distributions generally reflect profits earned by foreign-owned companies operating in Serbia. The balance-of-payments impact changes as investments move from the initial development stage into established operations.
During the investment phase, foreign capital enters the country, production facilities are built and imports of machinery and equipment can increase. Once businesses become profitable, a growing share of their earnings may be transferred to overseas shareholders. If reinvested profits and new investment do not offset these payments, income outflows can expand even as domestic production and exports strengthen.
Remittances Provide Support to External Accounts
Transfers from workers abroad remain an important counterweight. Net remittance inflows reached approximately EUR 2.48 billion in January-July, increasing 19.8% year on year.
These transfers contributed to a substantial surplus in the secondary-income balance. In practical terms, money sent to Serbia by workers living abroad offsets part of the income transferred overseas by foreign investors in Serbian companies. The two flows reflect the country’s simultaneous reliance on labour migration and inward foreign investment.
Domestic Ownership and Reinvestment Gain Importance
The longer-term implications depend partly on how these financial flows develop. Remittances could become less predictable over successive generations as migrants establish permanent lives abroad, while dividend payments may increase alongside the accumulated stock of foreign-owned capital. This creates an incentive for Serbia to expand domestic business ownership, encourage foreign companies to reinvest profits and increase the local value added generated by foreign-controlled operations.
Exports and transfers can continue supporting the current account, but the balance of payments is also influenced by how much income generated within the economy remains in the country rather than being distributed to overseas owners.
