Serbia recorded relatively stable net foreign direct investment in the first seven months of 2026, but the underlying flow of new foreign capital weakened significantly. Gross FDI inflows fell 26% to about €1.46 billion in January-July, while investment by Serbian residents abroad declined by approximately 55% to €417 million. Net FDI consequently reached around €1.04 billion, about 1% above the level recorded a year earlier.
Lower inflows behind stable net FDI
The stable net result was driven primarily by the reduction in Serbian investment abroad rather than an increase in foreign capital entering the country. Gross FDI is closely associated with new factories, acquisitions, energy projects, real estate and industrial expansion. It has also been an important source of economic growth, export capacity, construction activity and external financing. A prolonged decline in gross inflows would therefore affect one of Serbia’s established channels for financing new investment. The slowdown follows a weaker 2025, when overall FDI had already fallen substantially from earlier levels.
Portfolio investment increases
At the same time, Serbia recorded a sharp change in the composition of external financing. Net portfolio investment reached approximately €4.4 billion in January-July, compared with a net outflow of about €606 million during the same period a year earlier. A significant portion of the increase was linked to international bond issuance, indicating that a growing amount of foreign capital is entering Serbia through tradable debt instruments rather than direct investment.
Direct investment generally links capital to companies, physical assets and longer-term business operations. Portfolio flows can be raised more rapidly, but their volume is more closely affected by interest rates, refinancing conditions and international investor sentiment.
Investment and financing conditions
Strong demand for Serbian bonds can support government financing and foreign-exchange stability when investors consider the country’s yields and macroeconomic conditions attractive. Portfolio inflows do not directly create new industrial capacity in the same way as greenfield investment, acquisitions or expansion projects.
Serbia continues to attract investment across manufacturing, logistics, energy and technology, although the scale of new projects is described as smaller than during the strongest period of the previous investment cycle. European industrial weakness is also affecting investment decisions, with automotive and manufacturing companies reassessing capital expenditure, restructuring supply chains and taking a more selective approach to new capacity. Higher financing costs and weaker growth expectations further affect the economics of greenfield projects.
Serbia’s investment advantages
Serbia retains competitive operating costs, access to EU markets through trade agreements, infrastructure investment and an established manufacturing base. The key issue for the investment cycle is whether these factors are generating sufficient new projects to replace investment from the previous period.
The composition of external financing becomes increasingly relevant if direct investment remains subdued while portfolio capital accounts for a larger share of foreign inflows. Serbia has used strong FDI to help finance its external deficit while limiting dependence on borrowing. A prolonged combination of weaker direct investment and stronger portfolio flows would increase the importance of international debt markets and future refinancing conditions. The changing financing mix does not make portfolio investment inherently problematic, but it increases the importance of the quality and duration of incoming capital. The coming quarters will determine whether the decline in gross FDI represents a temporary slowdown or a broader change in Serbia’s external financing structure.
