Serbia’s External Deficit Shrinks as Trade and Services Strengthen

Serbia reported a significantly improved external position during the first four months of 2026, with a sharp reduction in the current-account deficit, stronger export performance, a growing services surplus and continued support from remittance inflows, according to balance-of-payments data.

The current-account deficit totaled EUR 404.9 million between January and April 2026, representing a 69.8% decline compared with the same period of 2025. The improvement reflects a combination of a narrower goods trade deficit, stronger services exports and resilient secondary-income inflows, reducing near-term external financing pressures.

While Serbia continues to operate with a structural trade gap financed through foreign direct investment (FDI), services exports, remittances and external financing, the latest figures indicate a more manageable external financing requirement than in previous years.

Export Growth Narrows Goods Trade Deficit

The country’s goods trade deficit declined 26.7% year-on-year to EUR 1.8 billion in the first four months of 2026. In April alone, the goods deficit reached EUR 637.1 million, down 21.2% compared with the same month a year earlier. Goods exports increased 7.8%, while imports rose only 1.2%, indicating that the improvement stemmed primarily from stronger export performance rather than a contraction in domestic demand.

The composition of export growth was concentrated in industrial sectors. Manufacturing contributed 8.2 percentage points to overall export growth, while mining and quarrying added 2.1 percentage points. The strongest individual contribution came from the manufacture of motor vehicles, trailers and semi-trailers, which added 6.1 percentage points to export growth. Mining of metal ores contributed a further 2.0 percentage points.

Exports of motor vehicles, trailers and semi-trailers increased 59.0% year-on-year during the January–April period, accounting for 6.2 percentage points of total goods export growth. Rising exports to Italy, linked to automotive production, reinforced Serbia’s integration into broader European manufacturing supply chains.

Sectoral Divergence Within Export Performance

Not all sectors contributed positively to external trade performance. Exports in the electricity, gas, steam and air-conditioning supply category declined 48.4% year-on-year, reducing total export growth by 1.5 percentage points. The agriculture, forestry and fishing sector also weighed on exports, posting a 20.0% decline compared with the same period of 2025. The data indicate that Serbia’s external improvement is being driven largely by industrial manufacturing and mining activities rather than broad-based gains across all sectors.

On the import side, total imports increased only 1.8% during the first four months of the year. Manufacturing imports rose 6.0%, supported by purchases of motor vehicles and trailers, refined petroleum products and basic metals. However, imports within the mining and quarrying sector fell 35.9%, while imports of crude petroleum and natural gas declined 35.2%. Imports of electricity, gas, steam and air-conditioning also decreased 34.8%, contributing significantly to the reduction in the overall goods trade deficit.

European Union Remains Dominant Trade Partner

The European Union continued to account for the majority of Serbia’s merchandise trade. EU member states represented 63.1% of Serbian goods exports in the first four months of 2026, an increase of 1.6 percentage points compared with the corresponding period of the previous year.

On the import side, the EU accounted for 55.6% of total goods imports. The figures underscore the central role of major European markets, including Germany and Italy, in supporting Serbia’s export sector and broader external accounts.

Services Surplus Provides Additional Support

The country’s services sector continued to strengthen its contribution to external stability. Serbia recorded a services surplus of EUR 923.0 million in January–April 2026, an increase of EUR 139.8 million, or 17.8%, compared with the same period of 2025.

Services exports totaled EUR 4.9 billion, rising 3.8%, while services imports reached EUR 4.0 billion, up only 1.0%. In April alone, the services surplus reached EUR 259.0 million, more than double the level recorded a year earlier. Among service categories, ICT services remained the largest export segment, generating EUR 1.51 billion in export revenues during the first four months of the year.

Exports of other business services totaled EUR 1.31 billion, while transport services generated EUR 783.7 million, marking a 9.0% increase year-on-year. Exports associated with travel services reached EUR 800.2 million, representing a slight decline of 1.1%, but remained a significant source of foreign-exchange earnings.

International Service Markets Expand Revenue Base

During the first quarter of 2026, Serbia’s largest service export markets were the United States, Germany and the United Kingdom. The largest service import sources were Greece, Germany and Switzerland.

The distribution highlights the diversified geographic structure of Serbia’s services economy, with export revenues extending beyond regional markets into Western Europe and North America.

Rising Income Outflows Reflect Foreign Investment Base

The less favorable component of the balance of payments was the primary-income account. The primary-income deficit widened to EUR 1.4 billion during the first four months of 2026, an increase of 9.3% compared with the previous year.

In April, the deficit reached EUR 451.5 million, up 4.4% year-on-year, primarily due to higher net outflows associated with direct investment income. The figures reflect the growing profitability of foreign-owned businesses operating in Serbia, resulting in larger dividend payments and reinvested earnings attributed to foreign investors.

Remittances Continue to Support External Stability

The secondary-income surplus increased to EUR 1.9 billion in the January–April period, rising 17.3% year-on-year. Net remittance inflows reached EUR 1.6 billion, while the secondary-income surplus in April alone totaled EUR 555.1 million, representing growth of 27.5% compared with April 2025.

During the first quarter, Germany accounted for 25.3% of remittance inflows, followed by Switzerland with 12.7%, Austria with 9.5% and Croatia with 6.1%. Personal transfers covered 89.4% of Serbia’s goods-account deficit during the first four months of 2026, compared with 50.6% in the corresponding period a year earlier.

Financial Flows Show Mixed Investment Trends

Excluding changes in foreign-exchange reserves, Serbia recorded a net financial-account outflow of EUR 1.0 billion between January and April. The largest component was a EUR 1.3 billion outflow related to trade credits and advances.

At the same time, Serbia attracted EUR 600.4 million in gross foreign direct investment inflows. After accounting for Serbian investments abroad, net FDI inflows totaled EUR 357.0 million, covering nearly 90% of the current-account deficit. The gross FDI figure was lower than the EUR 1.07 billion recorded during the first four months of 2025.

Preliminary 2025 data show that manufacturing accounted for 22.2% of FDI inflows, followed by mining and quarrying at 20.1%, professional, scientific, innovative and technical activities at 18.5%, construction at 16.0%, wholesale and retail trade, including repair of motor vehicles and motorcycles, at 13.6%, and financial and insurance activities at 5.0%.

Borrowing Activity and Reserve Position

Serbia registered a EUR 982.2 million net inflow from financial loans during the first four months of the year. The increase reflected net borrowing by enterprises of EUR 370.3 million, banks of EUR 314.8 million and the government of EUR 297.1 million.

Portfolio investments recorded a EUR 244.0 million net outflow, while currency and deposits showed a EUR 771.5 million net outflow. Foreign-exchange reserves remained at levels providing substantial external liquidity. Reserves covered 6.6 months of imports of goods and services, while totaling 31.7% of GDP, 161.7% of M1 money supply and 305.7% of short-term external debt.

The external accounts entered mid-2026 supported by stronger manufacturing exports, a growing services surplus, lower energy-related import pressure and robust remittance inflows. At the same time, the balance of payments continued to reflect rising income outflows linked to foreign investment profitability, lower gross FDI inflows and concentration within a limited number of industrial export sectors.