Economic situation Hoping for foreign investment

After many years of isolation as a result of UN sanctions, Serbia's economy successfully recovered in the past few years, until it saw a slight downturn in 2020 due to the pandemic.

Belgrade by night

Belgrade by night

Belgrade by night

However, Serbia has come far better through the economic crisis caused by COVID-19 than its neighbouring countries and most EU countries, partly because its tourism industry does not play a big role in the economy. The country also has a relatively sound fiscal policy record according to the International Monetary Fund (IMF), and it meets the Maastricht criteria on government debt. According to the IMF, economic growth in 2021 was 6.5 per cent, and rates are projected to be above four per cent in the coming years.

Business climate has improved

Serbia's reform efforts within the framework of the EU integration process are already bearing fruit. Since 2017, domestic and foreign investment has increased considerably, and the budget has been stabilised.

However, if the government wants to sustain this development and attract further investors to Serbia, it still needs to remove a number of obstacles, such as red tape, corruption, weaknesses in the legal system, inadequate protection of competition, and the shortage of skilled workers.

Development potential

Serbia is one of the most important markets in South-Eastern Europe. Thanks to its good transport connections and competitive wages, the country has a chance to become a successful supplier of industrial goods. Many German companies, especially from the auto parts industry, are active in Serbia and are increasing their involvement. However, in order to achieve further growth in this field, Serbia would have to make its vocational training programmes more practice-oriented and stop the exodus of skilled workers. Another factor that will become increasingly important for the country's further economic development is the decarbonisation of the energy sector, as the EU has announced a carbon tariff on exports to the EU (the Carbon Border Adjustment Mechanism, CBAM). After the envisaged transition period ends in 2026, imports to the EU will be subject to this tariff based on their carbon footprint. In view of the high rate of carbon emissions in Serbia's energy generation sector, this may massively drive up the prices of Serbian exports to the EU.

The Serbian government is willing, in principle, to reform its economic and financial policies as well as its governance and justice systems. This commitment to reform means great potential for development.

The country's official status as a candidate for EU accession means that it is already entitled to some European Union funding. It is using these funds, for example, to reform its administrative system, develop rural areas and modernise and expand its infrastructure.

As at: 08/04/2022