Serbia’s external accounts have displayed notable progress in 2026, characterized by a significant reduction in the trade deficit during the year’s early months. The deficit has decreased by approximately two-thirds year-on-year, driven by increased exports and moderated import growth. This positive trend has also been reflected in the current-account balance, which has alleviated some pressure on the country’s external financing situation. However, these advancements come alongside a marked decline in foreign direct investment (FDI) inflows, resulting in a precarious balance.
In recent years, FDI has been a crucial component of Serbia’s economic growth, with substantial investments in large-scale manufacturing, infrastructure, and agribusiness pushing net FDI inflows close to 5 billion euros in 2024. Serbia established itself as an attractive low-cost investment destination in Southeast Europe, benefiting from a skilled labor force and its proximity to the European Union. However, by 2026, the investment climate has shifted as global investors confront rising borrowing costs, slower economic growth, and heightened trade uncertainties. Consequently, FDI inflows during the first quarter of 2026 have fallen significantly compared to the same period in the previous year.
Despite this downturn, specific sectors continue to attract investor interest. Projects in renewable energy, IT services, and agribusiness are gaining traction due to Serbia’s relatively low labor costs, advancements in digital infrastructure, and access to EU markets. This shift indicates a movement in FDI from broad manufacturing towards more specialized and higher-value activities. The trade balance reflects this evolution; exports of manufactured goods—particularly automotive components, electronics, and processed foods—have remained robust while import growth has slowed due to weaker domestic demand and a more cautious fiscal approach.
However, there are concerns that these improvements may be temporary. A further decline in eurozone demand or escalating global trade tensions could adversely affect Serbia’s export-driven sectors. The International Monetary Fund (IMF) has already revised its growth forecast for Serbia in 2026 to around the low 3% range, attributing this adjustment to diminished external demand and tighter financial conditions. In light of these factors, while the current-account enhancement appears beneficial, it may not signify a long-term structural solution. Serbia’s external economic narrative thus reflects cautious optimism: although the trade deficit is decreasing and the current account is stabilizing, the country remains susceptible to uncontrollable global dynamics.
