Serbia’s external accounts improve in 2026, but slowing FDI leaves the current account fragile

Serbia’s external accounts have improved in 2026, yet the change appears closer to a cautious adjustment than a durable turnaround. The trade deficit has narrowed sharply in the first months of the year—down by roughly two-thirds year-on-year—driven by stronger exports and slower import growth, which has also helped ease pressure on the country’s external financing position.

Trade helps, but the financing engine is cooling

The current-account balance has moved in the same direction, reducing external strain. However, these gains are arriving at the same time as a marked slowdown in foreign direct investment (FDI) inflows, creating a more delicate equilibrium for an economy that has relied heavily on capital coming from abroad.

For much of the early 2020s, FDI acted as Serbia’s growth engine. Large-scale manufacturing projects, infrastructure deals and agribusiness investments pushed net FDI inflows close to 5 billion euros in 2024. The country positioned itself as a low-cost, pro-investment base in Southeast Europe, supported by a growing pool of skilled labour and proximity to the European Union.

Higher global costs shift investor behavior

In 2026, that momentum has cooled. The article attributes the change to a broader investor environment marked by higher borrowing costs, slower growth and a more uncertain trade outlook. Against that backdrop, investors have taken a more cautious stance toward new projects in Serbia. Available data indicate that FDI inflows in the first quarter of 2026 are significantly lower than in the same period of the previous year.

Where capital is still finding Serbia

Even with weaker overall inflows, interest remains concentrated in certain sectors. Renewable-energy projects, IT-driven services and agribusiness continue to attract capital because they align with Serbia’s cost advantages and evolving capabilities—such as relatively low labour costs and improving digital infrastructure—as well as access to EU markets.

This is also changing how FDI is being allocated: instead of broad-based manufacturing alone, capital is shifting toward more specialized activities with higher value added. The trade picture reflects elements of that reorientation. Exports of manufactured goods—particularly automotive components, electronics and processed foods—have held up well, while import growth has been restrained by weaker domestic demand and a more restrained fiscal stance.

A risk that improvements can reverse

The central concern for investors is that today’s progress could be reversed quickly. If eurozone demand slows further or global trade tensions escalate, Serbia’s export-oriented sectors could face renewed pressure. In addition, the IMF has already downgraded Serbia’s 2026 growth forecast to around the low-3% range, citing weaker external demand and tighter financial conditions.

Against that backdrop, the current-account improvement looks more like temporary relief than a structural fix. Serbia’s external-sector story is therefore one of cautious optimism: the trade deficit is narrowing and the current account is stabilizing, but slower FDI inflows leave the country exposed to shifts in global conditions it cannot control.