Serbia’s corporate sector enters 2026 flush with liquidity, but investment stays on hold

Serbia’s corporate sector begins 2026 with a financial profile that would usually precede an expansion phase: liquidity is abundant, leverage remains moderate, and access to bank financing is still available. Yet the expected investment cycle has not materialised. Companies are accumulating cash, refinancing selectively and postponing capital expenditure decisions—signalling a shift from growth to preservation.

Credit supply remains open, but borrowing is changing

Data from the National Bank of Serbia’s latest statistical bulletin shows that total credit to the private sector grew by around 14% year-on-year through late 2025, indicating that banks continue to provide ample funding. However, corporate borrowing has expanded more slowly than household lending, and its composition has moved in a more defensive direction.

The structure of corporate loans points to the clearest divergence. The share of investment lending fell sharply during 2025, dropping from approximately 16% of new corporate loans to around 8%. Working capital and short-term liquidity financing have taken its place. In other words, firms are still taking loans—but primarily to sustain operations rather than expand capacity.

Higher funding costs persist despite easing

This pattern matters because working capital supports continuity while investment lending underpins productivity gains. The current mix suggests Serbia’s corporate sector is not being choked off by finance; instead, it appears reluctant to deploy available funds into longer-duration projects.

Interest rates offer part of the explanation. Borrowing costs have started to ease from their peaks but remain elevated relative to levels that historically triggered renewed investment cycles. Dinar-denominated corporate loans are priced in the range of 6.4% to 7.0%, while euro-linked financing typically falls between 4.7% and 6.6%. Although this represents a decline of roughly 1.3 to 2 percentage points from earlier tightening highs, it can still weigh on projects with extended payback periods.

Companies are holding cash—strengthening resilience but delaying deployment

The other side of the equation is liquidity itself. Deposit data indicates that companies are holding significant cash reserves: dinar deposit rates range between 4.2% and 4.7%, while foreign currency deposits—predominantly euro-denominated—offer returns of around 2.0% to 2.2%. The currency breakdown reinforces persistent euroisation: approximately 95% to 97% of corporate foreign currency deposits remain in euros despite gradual progress in dinar-denominated lending.

Together, high liquidity and selective borrowing have improved many firms’ net financial positions, reducing refinancing risk and increasing resilience against external shocks. But it also implies that available capital is not being converted into productive assets at the pace investors would typically expect at this stage of a cycle.

Banks can lend; demand for long-term projects appears missing

From the banking system’s perspective, conditions look supportive rather than restrictive: liquidity is abundant, capital adequacy remains strong and credit supply does not appear constrained after stabilisation following the tightening cycle of 2022–2024. Banks are actively competing for corporate clients as lending conditions stabilise; the constraint appears instead on the demand side.

Corporate behaviour points toward deliberate risk management rather than capacity expansion—prioritising operational stability, maintaining liquidity buffers and reassessing investment plans until clearer signals emerge on costs and uncertainty.

SMEs drive loan activity toward shorter cycles

The caution also shows up in who is borrowing. Micro, small and medium-sized enterprises account for more than half of new loans, reflecting Serbia’s decentralised economic structure. These firms may be more agile than larger corporates but tend to be more sensitive to short-term conditions; their credit demand concentrates on shorter cycles such as inventory financing and cash flow management rather than large-scale capital projects.

Macroeconomic stakes: industrial upgrading depends on sustained capex

The implications extend beyond balance sheets. Serbia’s economic model increasingly emphasises industrial development, energy infrastructure and integration into European supply chains—objectives that require sustained corporate investment, particularly in sectors with longer time horizons and higher capital intensity.

The data suggests that transition is not yet underway: companies have financial capacity but are holding back. As a result, a gap between liquidity and deployment is widening—creating latent potential that has yet to be activated.

What could restart investing

Several factors will likely determine when firms move from preservation back toward expansion. The trajectory of interest rates remains central; further declines toward a roughly 5% threshold for dinar lending would improve the economics for long-term projects. At the same time, greater clarity on external demand—especially across key European markets—could strengthen revenue expectations and reduce uncertainty.

Policy measures may also influence timing through targeted incentives for investment, continued support for strategic sectors and further development of domestic capital markets designed to bridge financial capacity with corporate confidence.

A holding pattern driven by confidence rather than funding

For now, Serbia’s system remains in a holding pattern: corporates appear financially strong with robust liquidity and manageable leverage; banks look stable with sufficient capacity to support expansion; yet the investment cycle stays paused. This does not necessarily signal weakness—it reflects a recalibration by firms operating in a more complex environment.

The next phase of growth therefore looks less like a problem of finance availability than one of confidence about costs, demand and risk—and about when accumulated resources will finally be deployed into long-term projects.