Serbia's current account deficit narrowed 55.9% y/y to EUR 1.2bn in January-October 2013, underpinned by falling foreign trade gap and stronger remittances inflow, central bank (NBS) data showed. The reading accounted for 3.6% of the full-year GDP projection, down from nearly 9% a year earlier, according to IntelliNews calculations.

The 10-month trade deficit shrank 33.3% y/y to EUR 2.9bn as strong export growth offset a mild increase of imports. Exports climbed 22.1% to EUR 11.9bn over the period, due to higher motor vehicle and oil products sales abroad. Imports grew by a moderate 4.9% y/y to EUR 14.8bn in January-October reflecting subdued domestic demand. The current transfers’ surplus increased 10.2% y/y to EUR 2.6bn, as private remittances growth remained robust (up 16.8% y/y to EUR 1.9bn).

The financial account surplus narrowed 59.6% y/y to EUR 992.3mn in the first ten months of the year as recovering FDI couldn’t offset lower net portfolio investments and the negative balance of other investments.

Net FDI stood at EUR 606.9mn in January-October up from EUR 91.2mn a year ago. They covered over 51% of the current account gap, up from just 3.4% a year earlier. The 10-month net portfolio investments fell 6.9% y/y to EUR 927.9mn reflecting lower sales of debt securities abroad.

Serbia's central bank expects the current account deficit to fall to 4%-5% of GDP in 2013 from 10.5% in 2012 helped by rising automobile and oil products sales abroad. FDIs are also expected to increase to EUR 700mn (2.1% of GDP) this year after dropping to a ten-year low of EUR 232mn in 2012 (just 0.8% of GDP).