Serbia’s Trade Deficit Falls 11.3% as Export Growth Outpaces Imports

Serbia’s merchandise exports increased almost twice as quickly as imports during the first eight months of 2026, helping narrow the country’s trade deficit despite strong household consumption and largely stagnant industrial output.

Exports reached €23.71 billion in January-August, representing an 8.8% year-on-year increase, while imports rose 4.6% to €28.81 billion. As a result, the merchandise trade deficit declined 11.3% to €5.10 billion. Export coverage of imports also improved, reaching 82.3%, compared with 79.1% a year earlier. The external adjustment has taken place alongside resilient domestic demand rather than through a sharp contraction in consumption or imports.

EU markets remain central to export performance

The European Union accounted for approximately 58.3% of Serbia’s total goods trade, keeping the country’s export performance closely linked to demand across markets including Germany, Italy and Central Europe. Export growth has continued despite relatively subdued industrial conditions in parts of Europe. The expansion indicates that some segments of Serbia’s export base are increasing volumes, gaining market share or drawing on production capacity created through earlier investment.

Trade with neighbouring countries is also contributing to the external balance. Serbia recorded a surplus of approximately €2.19 billion with CEFTA countries, with exports including cereals, beverages, vehicles, pharmaceuticals and electrical equipment. Regional markets provide Serbian producers with nearby destinations supported by lower logistics costs and established commercial relationships.

Strong retail demand has not translated into equivalent import growth

The improvement in Serbia’s trade balance has occurred while domestic consumption remains strong. Real retail turnover increased by more than 7% during the first eight months, creating continued demand for consumer goods, vehicles and intermediate products, including imported products. Imports nevertheless grew at roughly half the rate of exports. The narrowing deficit therefore does not result solely from weaker domestic demand.

The adjustment is also associated with stronger export performance and potentially a different composition of imports. Lower energy-import costs compared with periods marked by exceptionally high gas and electricity prices may also be supporting the nominal trade balance.

Industrial output remains broadly stagnant

The trade figures contrast with weak overall industrial performance. Total industrial production increased only 0.1% in January-August, while manufacturing output declined again in August. The divergence indicates that export growth is not being matched by broad-based expansion across the industrial sector. Instead, stronger external sales may be concentrated in particular industries and large production facilities. Mining, electrical equipment, machinery, metals and selected foreign-owned manufacturing operations can generate significant export growth even while other manufacturing activities remain stagnant.

Changes in export prices can also increase the nominal value of trade without producing an equivalent increase in physical output. The composition of future export growth will therefore depend on whether the expansion spreads beyond a relatively limited group of industries.

Capital goods production points to investment activity

Production of capital goods has recorded substantial growth in 2026, indicating continued demand for machinery, equipment and investment-related products. If a greater share of this production is directed towards foreign markets, it could support a gradual shift towards a more sophisticated manufacturing structure.

That transition is increasingly relevant as wage costs rise and competition becomes more dependent on productivity, automation and higher-value products rather than labour-intensive production alone. Serbia has attracted significant investment into automotive components, electrical equipment, machinery, metals and electronics. The ability of those industries to generate additional export value will be important for offsetting weakness in other parts of manufacturing.

CEFTA provides a substantial regional export base

The approximately €2.19 billion surplus with CEFTA markets gives Serbia a significant regional trade position. Its domestic industrial base supplies food products, pharmaceuticals, machinery, beverages and other industrial goods across the Western Balkans. These markets provide an established export channel that can continue supporting producers when demand in European markets is weaker. At the same time, Serbia’s industrial ambitions require deeper participation in EU value chains and greater access to larger foreign markets. This increases the importance of competitiveness relative to manufacturers in Central Europe.

Production costs remain important for exporters

Serbian manufacturers continue to face cost pressures involving wages, electricity, logistics and financing. Those costs can affect export competitiveness as companies seek to maintain their position in international markets.

A relatively stable dinar provides predictability for importers and investors, while cost increases can be more difficult for exporters to absorb when productivity does not rise at the same pace. Future improvements in the trade balance will therefore depend increasingly on companies generating greater value added per worker rather than relying solely on higher export volumes. This issue is particularly relevant as environmental and industrial requirements in EU markets become more demanding.

Trade performance reflects a mixed 2026 growth structure

Serbia’s trade data form part of a broader economic picture in which household consumption remains strong, infrastructure and construction continue to contribute to activity, and mining and capital goods provide industrial support. Exports are also expanding rapidly, while overall manufacturing production remains weak.

The resulting economic structure combines strong domestic demand and export growth with limited broad-based industrial expansion. The sustainability of the improved external balance will depend on the composition of export growth, particularly whether expanding foreign sales are increasingly generated by higher-value production and new capacity or remain concentrated among a relatively narrow group of companies and commodities.