Serbia's current account deficit narrowed 55% y/y to EUR 910mn in January-July on the back of falling trade gap and rising remittances inflow, the central bank said. The reading accounted for 2.7% of the full-year GDP projection, down from 6.8% of GDP a year earlier.

The January-July trade deficit improved to 6.7% of the GDP forecast (EUR 2.2bn) from 10.9% of GDP (EUR 3.2bn) a year earlier due to a strong exports growth which offset a mild increase of imports. Exports climbed 20% to EUR 7.9bn over the period, supported by higher sales of cars, chemicals and oil refining products. Imports, on the other hand, recorded a mild 2.9% y/y increase to EUR 10.2bn in January-July. The seven-month current transfers’ surplus rose 8.1% y/y to 1.8bn, lifted by a 13% y/y rise in private remittances to EUR 1.3bn.

The financial account surplus narrowed 57.7% y/y to EUR 810mn in January-July as recovering FDI and higher portfolio investments couldn’t offset the negative balance of the other investments.

Net FDI equalled to EUR 391mn in January-July, swinging from a negative EUR 95mn a year earlier. They covered 43% of the current account gap. January-July net portfolio investments rose to EUR 1bn from EUR 99mn a year earlier.

Serbia's current account deficit is projected to fall below 7% of GDP in 2013 from 10.5% of GDP in 2012, on the back of rising automobile and oil products sales abroad.

FDI are also expected to increase to EUR 700mn this year after dropping to a ten-year low level of EUR 232mn in 2012. In particular, Serbia hopes UAE's leading agriculture products supplier - Al Dahra, to invest EUR 100mn in building a large irrigation system in fertile northern Serbia and a further EUR 100mn in the acquisition of several farming companies. Furthermore, Abu Dhabi's Mubadala is expected to start the construction of a new chip factory.