Serbia’s Merchandise Deficit Narrows as Exports Outpace Imports in 2026

Serbia’s merchandise trade balance improved in the first seven months of 2026, with exports increasing 8.8% to about €21.1 billion while imports rose 4.4% to €25.5 billion, even as industrial production weakened during July. Total merchandise trade reached €46.6 billion, representing growth of 6.3% year on year, according to Serbia’s Statistical Office. The trade deficit narrowed 12.6% to approximately €4.4 billion.

Export coverage of imports also strengthened, reaching 82.7%, compared with 79.4% a year earlier. The stronger external performance coincides with an acceleration in economic activity, with second-quarter GDP growth revised to 3.8%.

Export growth diverges from industrial output

The trade figures contrast with developments in domestic industry. Industrial production fell 2.3% year on year in July, while manufacturing output declined 1.6%. Industrial production was only marginally higher over the first seven months, with manufacturing remaining under pressure and electricity output also declining.

The difference between export values and industrial production volumes can partly reflect timing, inventories and prices. Export data measure the value of goods shipped abroad, while industrial indices primarily capture production volumes.

Companies can therefore generate higher export values even when aggregate industrial output is weak, particularly through higher-value products, inventory sales or favourable commodity prices. Serbia’s export base is also concentrated among a relatively limited number of large manufacturing, mining and metals companies. Foreign-owned producers in automotive components, electrical equipment, tyres, machinery and metals have significant exposure to overseas markets, while mining operations, including copper and gold production around Bor, provide another major source of exports.

EU markets remain central to Serbian exports

The European Union accounted for 58.6% of Serbia’s total merchandise trade during the first seven months, making European industrial demand a key factor for exporters. Serbian manufacturers are closely integrated into supply chains centred on Germany, Italy and Central Europe, particularly in automotive components, electrical equipment and machinery.

That integration provides access to a large European market but also leaves Serbian producers exposed to changes in industrial conditions among major European customers, including weakness in German manufacturing, vehicle production and EU trade policy.

Serbia has sought to broaden its export base by attracting additional Chinese investment and expanding regional trade. Projects involving batteries, robotics and advanced automotive components could alter the composition of exports if the facilities reach production scale.

Regional markets support domestic exporters

Trade with CEFTA economies provides another important source of external revenues and a substantial surplus. Domestic manufacturers and food producers can have stronger market positions in neighbouring Western Balkan markets than within the EU. Food, beverages, pharmaceuticals, electrical equipment and other Serbian products benefit from shorter transport routes, established distribution networks and similar consumer preferences.

Regional trade is particularly relevant for locally owned businesses, providing domestic companies with additional opportunities to generate foreign revenues alongside the export activity of foreign-owned manufacturers.

Consumption and investment could lift imports

The narrowing trade deficit has occurred despite strengthening domestic demand. Real retail sales increased 8.2% in July, while household consumption expanded 4% year on year in the second quarter. The government has also adopted a more expansionary 2026 budget revision, raising expenditure and introducing additional household support. Stronger consumption and investment would normally generate additional demand for imported goods, and imports could accelerate later in the year.

For the time being, however, export growth remains substantially ahead of import growth, reducing one of the external vulnerabilities associated with Serbia’s economic model. A smaller merchandise deficit also reduces the amount of external financing required to cover the goods-trade gap and provides additional support for foreign-exchange stability.

Capital-goods output records strong growth

Despite the weakness in overall industrial production, capital-goods output increased 8.8% year on year in July and 10.9% during the first seven months.

The increase indicates stronger activity in parts of manufacturing linked to investment demand. Machinery and equipment production is more closely connected with engineering and productivity than consumer-oriented assembly, while continued expansion in these areas could contribute to greater export diversification. The development is also relevant as labour availability tightens and wages increase, creating greater pressure for industries to generate more value per employee.

Chinese projects expand potential export capacity

Chinese companies are becoming increasingly visible in Serbia’s manufacturing sector. Projects include the €100.5 million Reliance battery plant in Inđija, humanoid-robot production by Minth in Šabac, and additional investments in automotive components.

If these facilities reach large-scale export production, they could increase Serbia’s exposure to higher-value technology products. The domestic economic contribution will also depend on the extent to which the projects use Serbian suppliers, engineers and software rather than relying predominantly on imported sophisticated components and final assembly.

Mining remains a major source of export revenue

Mining continues to contribute significantly to Serbia’s external sector. Expansion by Zijin has increased copper and gold production, strengthening commodity exports and generating foreign-currency revenues.

The concentration also exposes export performance to changes in metal prices, while major mining projects face environmental and permitting considerations. Mining generates fewer jobs per euro of output than manufacturing, making domestic processing and the development of engineering activity around mineral resources relevant to the broader industrial structure.

Trade balance supports external stability

The improvement in goods trade contributes to Serbia’s external position and supports the managed exchange-rate framework maintained by the National Bank of Serbia. The dinar has remained highly stable against the euro for years, reducing currency exposure for businesses and households. Maintaining that stability depends in part on confidence in Serbia’s external position.

A narrower goods deficit, strong services exports and continued foreign direct investment inflows support that position, while Serbia also maintains substantial foreign-exchange reserves. The stronger merchandise balance therefore provides the central bank with additional capacity to manage potential external shocks.

Infrastructure spending could increase import demand

The trade improvement will face additional pressure as public and private investment expands. Serbia is entering a period of substantial spending on roads, railways, EXPO 2027 projects, energy infrastructure and private industrial developments, all of which require imported machinery and materials.

Household consumption is also strengthening, creating another potential source of import growth. Government fiscal measures could reinforce that demand. If exports continue to expand faster than imports while infrastructure investment rises, the trade figures would point to stronger underlying competitiveness. Conversely, a renewed widening of the deficit caused by consumer and construction-related imports would indicate a more temporary improvement.

Export composition becomes increasingly important

The quality and domestic content of exports are becoming more significant alongside headline growth. Greater use of Serbian suppliers, engineering, software and locally generated value, as well as higher domestic retention of corporate profits, would determine how strongly export expansion feeds into productivity and income. Serbia has developed a substantial foreign-manufacturing base, while the latest trade figures show exports continuing to grow despite weakness in parts of the industrial sector.

During the first seven months of 2026, exports rose 8.8%, imports increased 4.4% and the merchandise trade deficit fell 12.6%, leaving the economy with a stronger external trade position even as domestic demand and public spending continue to expand.