Serbia’s textile industry produced one of the strongest first-quarter turnover and employment results in the corporate survey, yet it also recorded the economy’s most severe liquidity pressure. The combination points to a sector in which factories are working and exports are moving, but financial value is not accumulating at the same pace.
Around 30% of textile companies increased turnover in Q1, the highest proportion among the surveyed sectors. Approximately 29% of textile exporters increased shipments, while 19% of companies expanded employment.
Those figures would normally indicate a healthy production cycle. Yet 42% of textile respondents lacked sufficient funds for optimal operations, compared with 22% across the entire survey. Only 58% described their operating finance as adequate.
The sector’s business model explains much of the contradiction. Textile and apparel production is labour intensive, while many Serbian factories work as subcontractors for foreign brands. The customer may supply designs, specifications and sometimes materials, leaving the Serbian producer to compete primarily on labour cost, delivery reliability and quality.
Margins in these contracts are often narrow. Wage increases cannot always be passed through immediately, particularly where orders have been priced months in advance. Energy, transport and imported-material costs can rise during the production cycle, while the finished order may be paid only after delivery and acceptance.
Revenue can therefore increase while liquidity deteriorates. A factory accepting more orders must finance wages, utilities, packaging and working capital before it receives payment. Growth raises the cash requirement even when the order is profitable on paper.
The export orientation creates additional dependence on customer concentration. A Serbian producer supplying one or two European brands has limited negotiating power over payment periods and prices. Contract loss can quickly leave specialised labour and machinery without sufficient utilisation.
Expectations for Q2 were also less confident than the first-quarter results. Approximately 25% of textile companies anticipated lower turnover, one of the highest expected contraction rates among the surveyed sectors. Only 35% expected growth.
The sector nevertheless retains strategic value. It provides employment outside Serbia’s largest urban centres and can move into higher-value technical textiles, protective equipment, automotive fabrics, furniture materials and specialised industrial products. These segments offer better margins than basic garment assembly but require investment in machinery, certification and product development.
Working-capital finance tailored to confirmed export orders could reduce the liquidity constraint. Factoring, export-credit insurance and buyer-backed supply-chain finance would allow producers to convert receivables into cash without relying entirely on conventional collateral.
The textile sector is not contracting in a simple sense. It is producing, exporting and hiring while absorbing a disproportionate share of financial risk. That combination makes its revenue growth more fragile than the headline turnover data suggest.
