Serbia's current account deficit shrank 56.2% y/y to EUR 954.2mn in January-August 2013 thanks to narrowing foreign trade gap and higher remittances inflow, the central bank said. The reading accounted for 2.9% of the full-year GDP projection, down from 7.3% of GDP a year earlier, according to IntelliNews calculations.

The eight-month trade deficit dropped 32.9% y/y to EUR 2.4bn as strong export growth offset a mild increase of imports. Exports climbed 20.5% to EUR 9.2bn over the period, underpinned by higher sales of motor vehicles, electrical equipment, chemicals, electricity, rubber goods and food. An increase in the output of basic metals evident since July 2013 will also support Serbia’s export growth in the near term. Imports, on the other hand, increased by a mild 3.2% y/y to EUR 11.6bn in January-August reflecting subdued domestic demand. The current transfers’ surplus rose 8.0% y/y to EUR 2.1bn, as private remittances growth remained robust (up 12.8% y/y to EUR 1.5bn).

The financial account surplus narrowed 60.5% y/y to EUR 818.7mn in the first eight months of the year as recovering FDI and higher portfolio investments couldn’t offset the negative balance of the other investments.

Net FDI stood at EUR 463.4mn in January-August, swinging from a negative EUR 49.5mn a year earlier. They covered nearly 49% of the current account gap. January-August net portfolio investments rose to EUR 978.4bn from EUR 128.7mn a year earlier.

Serbia's current account deficit is projected to fall below 7% of GDP in 2013 from 10.5% in 2012, on the back of rising automobile and oil products sales abroad. FDI is also expected to increase to EUR 700mn this year after dropping to a ten-year low level of EUR 232mn in 2012.