Serbia’s gross foreign direct investment (FDI) inflows fell 21.9% to €1.73 billion, while net portfolio investment reached €4.41 billion, signalling a shift in the country’s external financing structure towards international securities markets.
Net FDI remained relatively stable at €1.26 billion, compared with €1.29 billion in the previous-year period. Meanwhile, portfolio investment reversed from a net outflow of €879 million to a substantial inflow, primarily driven by bond issuance by Serbian residents on international financial markets. The figures highlight the difference between securing external borrowing and attracting long-term foreign investment into manufacturing, energy, infrastructure and other productive sectors.
Reinvested Earnings Weaken as Manufacturing Gains Share
Gross FDI declined by approximately €483 million, while net FDI decreased by just €32 million, partly because Serbian residents reduced their direct investments abroad. A key factor was the decline in reinvested earnings from €1.19 billion to €839 million, representing a reduction of approximately 30%. These earnings reflect profits retained within foreign-owned Serbian businesses rather than distributed to shareholders.
Other investment components improved. Direct equity investment excluding reinvested earnings moved from a negative €64 million to a positive €142 million, while direct-investment debt instruments increased from approximately €159 million to €275 million.
Manufacturing remained the largest recipient of foreign investment, accounting for 36% of FDI, up from 30% in the comparable period. Wholesale and retail trade represented 18.5%, construction 14%, mining 12.6%, and electricity and gas activities 9.5%. Companies including Stellantis, Serbia Zijin Mining, Serbia Zijin Copper, ZF and Bosch illustrate Serbia’s established position in international industrial supply chains. Automotive production, mining, metals processing, electrical equipment and renewable energy remain important parts of the investment landscape.
Manufacturing’s higher share does not necessarily indicate an increase in the absolute value of investment. Weaker aggregate inflows could eventually affect new factories, equipment orders and industrial construction, although the available figures do not establish that approved projects have been cancelled or postponed.
Bond Issuance Reshapes External Financing
Net portfolio investment recorded a swing of approximately €5.29 billion, reaching €4.41 billion after a net outflow of €879 million in the previous-year period.
International securities can provide governments, banks and companies with funding beyond domestic lending markets. However, bond financing differs from direct investment because it creates contractual interest and repayment obligations, regardless of the performance of the activity being financed.
The entire portfolio inflow should not be interpreted as new government borrowing, as the figures cover securities issued by Serbian residents more broadly. Nor does the amount automatically represent funding for new factories or infrastructure; its impact depends on how proceeds are used, repayment schedules and whether funds support new investment or refinancing. The financial account, excluding reserve-asset changes, recorded a €3.27 billion net inflow, while other investment registered a net outflow of approximately €2.4 billion. Net financial-loan repayments totalled €223 million.
Serbian enterprises recorded approximately €859 million in net loan repayments, while domestic banks increased their net external borrowing by €584 million. The government recorded around €60 million in net borrowing through financial loans.
These different flows reflect changing financing conditions across the corporate, banking and public sectors. Additional external borrowing can support bank liquidity and lending, while industrial and infrastructure projects still require careful assessment of construction costs, energy prices, procurement, environmental obligations and future revenues.
Export Growth Supports the External Balance
Serbia’s current-account deficit narrowed 14% to €2.11 billion, while the goods-trade deficit decreased 10.4% to €3.82 billion. The services surplus remained broadly stable at €1.36 billion.
Merchandise exports increased 9.3%, supported by motor vehicles, fabricated metal products and mineral commodities. Exports from motor vehicle, trailer and semi-trailer manufacturing rose 48.2%, while mining and quarrying exports increased 33.1%. Exports from electricity, gas, steam and air-conditioning activities declined 47.5%.
The European Union accounted for 62.6% of Serbia’s goods exports. These results show that earlier industrial investment continues to support export performance despite weaker new FDI inflows. Net FDI covered approximately 59.6% of the current-account deficit, compared with 52.6% in the previous-year period. The improvement reflected the narrower deficit rather than stronger net foreign investment.
Investment-Income Payments and Services Exports
Serbia’s primary-income deficit widened 20.1% to €3.69 billion, from €3.08 billion. Direct-investment income debits increased from approximately €2.70 billion to €3.33 billion, reflecting income associated with foreign ownership of Serbian businesses. These accounting figures do not represent cash dividends transferred abroad exclusively, as they also include earnings attributed to foreign investors and treated as reinvested. Nevertheless, rising investment-income payments increase the importance of export competitiveness, domestic supplier development and continued productive investment.
The deficit was partly offset by a €4.04 billion secondary-income surplus, including approximately €3.41 billion in net remittance inflows.
Services exports provided additional support. Serbia generated €10.6 billion in services exports, up 6.8%, while imports reached approximately €9.2 billion, leaving a €1.36 billion surplus. Information and communication technology exports rose 5.8% to €3.14 billion, and other business-services exports increased 9.1% to €2.71 billion. Software, business-process services and engineering-related activities are expanding sources of external earnings, although their growth depends on skilled labour, digital infrastructure and access to international customers.
Investment Quality Becomes Increasingly Important
Foreign-exchange reserves provided a buffer, covering approximately 6.8 months of imports. Nevertheless, the decline in gross FDI raises questions about the pipeline of new corporate investment and the sustainability of a financing structure increasingly reliant on securities markets.
Banks and institutional investors will be watching industrial capital expenditure, reinvested foreign earnings, new investment projects, international bond maturities and external borrowing costs. For Serbia, stronger foreign investment will depend not only on financial incentives but also on reliable infrastructure, predictable regulation, qualified labour, competitive energy costs and domestic industrial suppliers.
The key distinction is between capital used to meet existing financial obligations and investment that expands future earning capacity. Maintaining access to international borrowing while attracting more capital into factories, energy projects, infrastructure and export-oriented businesses remains central to Serbia’s external financing sustainability.
