Serbia

Serbia’s financing profile benefits from improved market credibility, declining public debt ratios and continued access to both domestic and international funding. Sovereign issuance conditions remain favorable, supported by investor appetite for dinar- and EUR-denominated debt. However, risks are rising at the corporate level. High interest rates over 2023-2024 and slowing demand have strained liquidity among SMEs, particularly in construction, transport and trade-related sectors. Insolvency filings and restructuring requests have increased modestly, reflecting delayed payment cycles and higher refinancing costs. The banking sector remains well-capitalized, but credit standards have tightened, especially for smaller firms and households. External financing risks persist, as a structurally negative current account relies on sustained FDI inflows to offset import-heavy investment. Any slowdown in foreign capital or adverse geopolitical developments could increase refinancing pressures and currency sensitivity, though reserves provide a buffer.

Political risks remain elevated and structurally embedded. Tensions with Kosovo continue to pose episodic security and diplomatic risks, with limited prospects for a durable resolution. Serbia’s foreign policy balancing between EU accession aspirations and close ties with Russia and China adds strategic ambiguity, exposing the country to shifting external pressures. Domestic politics remain dominated by a strong executive cornered by prolonged protests with increasing medium-term succession and institutional risks. Public opposition to mining and energy projects, particularly lithium, has the potential to intensify social unrest and delay strategic investments. Ahead of EXPO 2027, political incentives favor continuity and stability, yet reform momentum may weaken as authorities prioritize project delivery over governance improvements. Overall, political risks are unlikely to derail growth but continue to weigh on long-term predictability.