Serbia recorded higher net foreign direct investment in the first five months of 2026, but the structure of inflows indicates that the recovery is being driven mainly by financing from existing foreign investors rather than a renewed wave of new capital projects. Net FDI reached €596 million between January and May 2026, compared with €438.9 million in the same period of 2025, representing annual growth of almost 36%.
- Existing investors provide majority of FDI financing
- Investment cycle remains below previous levels
- Manufacturing remains the largest investment destination
- Europe remains Serbia’s dominant investment source
- European industrial slowdown affects new investment decisions
- Energy and regulatory issues influence investor decisions
- Export growth supports Serbia’s external position
- Domestic suppliers remain key to future investment model
Total foreign investment entering Serbia declined to €893 million, down approximately 32% from €1.31 billion a year earlier. After including direct investments by Serbian residents abroad, the resulting net inflow was sufficient to cover Serbia’s €560.6 million current-account deficit. The figures provide short-term balance-of-payments support but do not indicate a return to the investment levels seen before the sharp slowdown in 2025.
Existing investors provide majority of FDI financing
The latest data from the National Bank of Serbia show that the composition of net FDI differs significantly from previous investment cycles. Between January and May 2026, net FDI consisted of approximately €514 million from debt instruments, €69.8 million from reinvested earnings, and only €12.2 million from equity other than reinvested earnings.
These components correspond to the reported €596 million net inflow. The limited contribution from new equity investment is the most notable feature of the data. Debt instruments accounted for approximately 86% of the net FDI total, indicating that financial relationships between foreign parent companies and their Serbian subsidiaries played a much larger role than new ownership capital injections. The figures do not indicate that foreign companies are reducing their presence in Serbia. Financing provided by existing owners can support working capital, refinancing, operational needs and gradual expansion.
Foreign companies already operating in Serbia benefit from established factories, supply chains, trained employees, logistics networks and local market knowledge, making incremental investment less costly than establishing entirely new operations. The structure also means Serbia’s investment performance is increasingly dependent on decisions made by companies already present in the country.
Investment cycle remains below previous levels
The latest improvement follows a significant decline in foreign investment during 2025. Serbia’s net FDI inflow fell by approximately 51% last year, from around €4.6 billion in 2024 to €2.28 billion. Total inward FDI decreased from a record €5.2 billion to approximately €3.48 billion. Net inflows declined to around 2.5% of GDP, compared with an average of approximately 6.1% of GDP between 2020 and 2024.
The first five months of 2026 therefore represent an improvement from a weak comparison base rather than a return to the previous investment cycle. Earlier years were characterised by a steady pipeline of greenfield factories, automotive suppliers, mining projects, logistics facilities and real-estate developments that generated new equity investment, imported equipment, construction activity and employment growth.
Manufacturing remains the largest investment destination
Sector data provide a more positive indication of Serbia’s industrial position. Preliminary figures for the first quarter of 2026 show that manufacturing attracted 63.9% of inward investment. Other sectors included wholesale and retail trade, including vehicle repair, with 17%, mining with 8.6%, financial and insurance activities with 8.2%, and professional, scientific and technical activities with 5.5%.
The manufacturing share is significant because it links foreign investment directly with export capacity. During January-May 2026, manufacturing exports increased by 8.6%, contributing 7.5 percentage points to overall export growth. The largest individual contribution came from motor vehicles, trailers and semi-trailers, reflecting the impact of automotive production and supplier capacity. Foreign-owned manufacturers remain integrated into European supply chains, particularly in automotive components, electrical equipment, rubber products, machinery and processed metals.
Europe remains Serbia’s dominant investment source
The European Union continued to dominate Serbia’s trade and investment links. The EU accounted for 63.1% of Serbia’s goods exports during the first five months of 2026, an increase of 1.2 percentage points compared with the previous year. Europe also represented approximately 86% of inward FDI liabilities during the first quarter, including 82% from EU-27 countries and around 4.3% from other European countries.
Other sources included China with approximately 8.4%, the United States with 4.6%, and the United Arab Emirates with 0.2%. The figures highlight Serbia’s continued financial and industrial dependence on European markets despite efforts to expand investment relations with China, Gulf countries and other non-EU economies. Chinese-owned industrial assets, including Serbia Zijin Copper, Zijin Mining’s Čukaru Peki mine, HBIS Serbia, Linglong Tire and Minth Automotive, remain important parts of Serbia’s industrial base. The pipeline of additional Chinese investment commitments weakened significantly during 2025.
European industrial slowdown affects new investment decisions
Investment conditions in Serbia’s main European partner markets have become more challenging. Germany and Italy, among Serbia’s most important industrial partners, have faced prolonged manufacturing weakness. Automotive companies are managing the transition towards electric vehicles while reducing costs, restructuring production and reassessing investment plans. Higher energy costs, weaker demand and tighter financing conditions have reduced appetite for major greenfield projects across Central and Eastern Europe.
For multinational companies, these conditions encourage selective reinvestment in existing Serbian operations rather than large-scale expansion. Adding machinery or upgrading an existing factory requires less risk than building a new production platform, where companies must assess long-term demand, market access and regulatory stability.
Energy and regulatory issues influence investor decisions
Serbia’s investment environment is also affected by geopolitical and regulatory developments. The unresolved ownership and sanctions situation surrounding Naftna Industrija Srbije (NIS), operator of the Pančevo refinery, has become a test of investment security.
The refinery supplies most of Serbia’s domestic fuel demand, while its Russian ownership structure has exposed the company to US sanctions pressure. Any disruption involving ownership rights could affect perceptions of political and regulatory risk among investors. Trade and environmental regulations are also becoming increasingly important.
Serbian exporters must increasingly align with European requirements covering industrial emissions, product standards, state aid rules and competition policy. The introduction of the EU Carbon Border Adjustment Mechanism (CBAM) creates additional compliance requirements for companies involved in steel, aluminium, cement, fertilisers and electricity-related production.
Export growth supports Serbia’s external position
Despite weaker investment inflows, Serbia’s industrial and export performance remained positive. Goods exports increased by 8% during the first five months of 2026, supported by a 50.8% increase in motor-vehicle exports and 35.7% growth in mining and quarrying exports.
The merchandise trade deficit narrowed by 21.7% to €2.3 billion, while the services surplus expanded by 30.4% to €1.2 billion. As a result, Serbia’s current-account deficit declined by almost 69% compared with the same period a year earlier. The improved external balance reduces immediate pressure to attract foreign investment solely to finance external deficits, allowing greater focus on the quality and productivity impact of new capital.
Domestic suppliers remain key to future investment model
A stronger long-term investment structure would require deeper integration of Serbian companies into multinational supply chains. Foreign-owned manufacturers generate broader economic benefits when domestic firms provide components, engineering services, maintenance, logistics, software and environmental solutions. Serbian small and medium-sized companies remain only partially integrated into global production networks, with weaker participation around some non-European investments.
Greater domestic supplier development could reduce dependence on decisions made at foreign headquarters and strengthen the resilience of the industrial base. Domestic private investment continues to face challenges related to regulatory uncertainty, administrative inconsistencies, judicial predictability and the impact of discretionary state support.
The first five months of 2026 show that Serbia continues to retain the confidence of many existing foreign investors. Manufacturing remains the leading recipient of investment, exports are expanding and foreign subsidiaries continue receiving financial support. At the same time, new equity capital remains limited, leaving Serbia’s investment model more dependent on established foreign companies rather than a broader pipeline of new industrial projects.
