The first quarter of 2026 reveals a complex landscape for Serbia’s external accounts, marked by a significant current account surplus that masks underlying challenges in capital flows. The balance of payments indicates short-term stabilization primarily driven by reduced trade deficits and strong services performance, rather than a structural enhancement in competitiveness.
In January 2026, Serbia achieved a current account surplus of €418.7 million, a notable increase of 264.9% year-on-year. This positions Serbia among the few emerging European economies with a positive external balance. The primary contributors to this surplus include a reduced goods deficit, robust service exports, and moderated income outflows.
Historically a source of deficit, the goods balance saw substantial improvement as the goods deficit decreased to €85.1 million in January, down 73.8% from January 2025. This change is attributed to a sharper decline in imports (12.4%) compared to exports (4.2%), suggesting a contraction in domestic demand rather than an expansive export environment.
Services exports have emerged as a critical stabilizing factor, with the services surplus reaching €330.4 million—an increase of 17.5% from the previous year. This sector has shown resilience, particularly in IT services, transportation, and tourism, making it the most reliable source of foreign exchange amidst fluctuations in industrial exports.
Despite these positive trends, the income account remains a structural burden. The primary income deficit stood at €163.7 million, largely driven by profit repatriation by foreign investors. Although net outflows related to direct investment income have decreased, they continue to be a persistent issue due to Serbia’s reliance on foreign direct investment for economic growth.
Secondary income flows, especially remittances from abroad, have provided additional support. Worker remittances totaled €197.2 million during the quarter, highlighting Serbia’s reliance on these inflows as a counter-cyclical buffer during times of economic weakness or external demand shocks.
However, the most significant concern arises from the financial account, which recorded a net capital outflow of €455.5 million—marking a sharp decline from the nearly balanced position observed a year prior. This suggests that the current account surplus is increasingly compensating for weak capital inflows and heightened financial leakages.
Foreign direct investment has notably declined; net FDI inflows dropped to €55.3 million, down 76.9% year-on-year, while gross inflows halved to €135.7 million. The composition of these inflows remains favorable with equity investments leading over debt instruments, yet the overall contraction indicates waning investor interest.
Portfolio investments also reflected negative trends as Serbia transitioned from net inflows to a net outflow of €15.9 million due to diminished foreign interest in sovereign debt amid rising global interest rates and geopolitical uncertainties.
The largest component of outflows originated from “other investments,” particularly trade credits and deposits, which saw net outflows reach €905.2 million due to increased corporate liquidity needs and adjustments in balance sheets—signaling rising caution within the corporate sector.
Additionally, foreign exchange reserves fell by €413 million primarily due to central bank interventions aimed at currency stabilization and managing external pressures. Although reserves remain sufficient, this decline underscores the increasing costs associated with maintaining macroeconomic stability amid declining capital inflows.
Overall, Serbia’s external position for Q1 2026 can be described as externally balanced yet internally strained. The current account surplus exists but is not entirely organic; it relies heavily on import reductions and service export strength instead of widespread industrial recovery. The decline in FDI alongside rising capital outflows introduces new vulnerabilities that could impact future economic stability and growth prospects in Serbia.
