Serbia’s early-2026 current account surplus masks a shift away from FDI

Serbia’s external accounts in early 2026 offer a clear signal that the country’s macroeconomic cycle may be moving into a different phase—one where headline gains on the current account do not automatically translate into stronger, more durable financing. In January, Serbia recorded a current account surplus of €418.7 million, up sharply from €114.8 million a year earlier, suggesting an improved balance between domestic demand and foreign trade.

Current account improves as imports fall and services lead

The surplus was driven primarily by a narrowing goods trade deficit and a stronger services balance. The goods deficit shrank as exports grew modestly while imports declined more noticeably. Imports contracted by 3.5%, pointing to weaker domestic demand for foreign goods, particularly intermediate inputs used in industrial production.

Services continued to generate a large surplus of €330.4 million, up 17.5% year-on-year. The report links this performance to the growing competitiveness of Serbia’s services sector, including information technology, business process outsourcing, and transport services—sectors that have become increasingly important sources of foreign exchange earnings.

Remittances also remained supportive. Net inflows from workers abroad reached about €197.2 million, providing steady secondary income that helps underpin household consumption and overall external stability during periods of uncertainty.

FDI contraction complicates the sustainability picture

Despite these positive elements, the current account surplus needs to be interpreted with caution because it is occurring alongside a pronounced contraction in foreign direct investment inflows. Net FDI fell by 76.9% year-on-year to €55.3 million, while gross inflows dropped by 50.8% to €135.7 million.

This divergence matters because Serbia has relied on FDI for more than a decade as a central pillar of its growth model—providing not only capital but also technology transfer, managerial expertise, and integration into international production networks. A sharp decline in early-2026 therefore raises questions about how sustainable the previous investment-led pattern may be.

The composition of FDI inflows in January shows that total inflows of €135.7 million were mostly equity investments, which are generally viewed as less volatile than other forms of capital and not directly tied to external debt. However, the overall level was still significantly lower than in prior years, indicating reduced investor interest or postponed decisions.

At the same time, FDI outflows from Serbia increased to €80.4 million—more than double the previous year’s level—suggesting that domestic firms are investing abroad more aggressively, potentially seeking new markets or better operating conditions. While outward investment can reflect corporate maturity, it also represents capital leaving Serbia that could otherwise support domestic growth.

Financial account shows net outflows and reliance on shorter-term mechanisms

The shift becomes clearer when looking beyond the current account to capital flows. Serbia recorded a net financial outflow of €455.5 million versus an almost balanced position in the prior year. This was driven largely by developments under “other investments,” which includes trade credit, loans, and deposits.

The most notable change was an increase in trade credit by €997.5 million, indicating that companies are extending and receiving credit within supply chains—effectively substituting for more traditional financing channels. While this can support operations in the short term, it can also raise liquidity and payment-cycle risks if conditions tighten.

Deposits also moved against Serbia: there was a net outflow of €432.7 million, reflecting changes in behavior by both companies and households that may relate to portfolio diversification strategies and exchange-rate expectations amid broader financial conditions.

Portfolio investment flows showed further strain on external financing: Serbia posted a net outflow of €15.9 million compared with an inflow in the previous year, suggesting reduced foreign appetite for Serbian financial assets—particularly government securities—an area important for public debt financing.

Implications for reserves, policy and investors

Taken together—lower FDI inflows alongside increased trade credit and net financial outflows—the data point to a reconfiguration of Serbia’s external financing model. The economy appears less dependent on stable long-term capital inflows and more reliant on shorter-term forms of funding that can be more volatile.

This has several implications highlighted in the report: it increases the importance of domestic sources of investment such as savings and reinvestment; it raises potential financial stability concerns if short-term credit mechanisms expand further; and it affects macroeconomic conditions through pressure on foreign exchange reserves.

In January alone, reserves declined by €413 million as capital flows weakened relative to earlier patterns. The central bank responded with interventions in the foreign exchange market, but persistent pressures could require policy adjustments if they continue.

A transition toward selective capital—and tougher competition

The report frames these developments as part of a broader transition away from an earlier phase defined by strong FDI inflows and deeper integration into global production networks. It attributes some of the FDI slowdown to global factors such as higher interest rates and greater uncertainty making investors more cautious, while regional competition has intensified as other Central and Eastern European countries offer incentives and regulatory frameworks perceived as more attractive.

Domestic constraints are also cited as relevant to investor confidence—particularly energy instability and limited diversification within industry—as well as growth concentration in sectors such as automotive that may narrow perceived opportunities elsewhere.

What Serbia must do next

The challenge for policymakers is twofold: attract new investment while improving resilience within the domestic economy so that external shocks do not translate into instability at home. The report points to priorities including strengthening the business environment, addressing structural constraints tied to energy and infrastructure, supporting innovation, and expanding diversification efforts.

For investors, the environment presents both risks and opportunities: weaker FDI signals selectivity among capital providers, but it may also create room for well-structured projects aligned with longer-term themes such as energy transition, digitalization, and advanced manufacturing.

Serbia’s early-2026 external accounts therefore provide an instructive window into evolving dynamics: even with a positive current account outcome in January, sustainability depends on how capital flows develop—and whether financing can remain stable without relying increasingly on shorter-term mechanisms that carry their own risks.