Serbia’s sovereign credit standing has improved, but borrowing costs continue to reflect international investors’ assessment of emerging-market risks. The gap between stronger credit fundamentals and the premium demanded for uncertainty remains visible in the country’s external financing conditions.
S&P rates Serbia BBB- with a stable outlook, following its decision to raise the country to investment grade in October 2024. Fitch maintains a BB+ rating with a positive outlook, while Moody’s assigns Serbia Ba2 with a stable outlook. Despite the investment-grade assessment from S&P, Serbia’s risk premium has increased amid wider market uncertainty and changing investor requirements for emerging-market debt.
Sovereign Risk Premium Rises
Serbia’s risk premium reached 185 basis points at the end of September, increasing by 21 basis points from the end of August and standing 26 basis points above the end of 2025.
The National Bank of Serbia (NBS) attributed the increase primarily to global uncertainty, geopolitical risks and higher required yields across emerging markets.
The movement indicates that an improved sovereign credit profile does not necessarily shield a country from broader shifts in international financial conditions. Investors continue to price external risks alongside domestic economic and fiscal fundamentals.
Implications for Corporate Financing
The difference between credit quality and market pricing also affects companies seeking international financing. Although a stronger sovereign profile can help improve borrowing conditions, corporate funding costs remain exposed to emerging-market risk pricing, European interest rates and changes in investors’ appetite for geopolitical risk.
Serbia therefore faces two concurrent market dynamics: stronger domestic credit fundamentals and a continuing external risk premium. The latter can influence the cost and availability of international capital even as sovereign creditworthiness improves.
Role of the Domestic Dinar Market
Developing deeper domestic capital markets could provide an additional source of financing when international borrowing becomes more expensive. In particular, greater access to dinar-denominated funding could reduce reliance on periods when euro-denominated debt carries higher costs.
Expanding local-currency financing would give the sovereign and domestic borrowers another funding channel, while potentially limiting their exposure to fluctuations in international euro debt markets.
