Santander Trade Markets: Serbia for Foreign Investors

FDI flows have been positive since 2012. According to the 2020 World Investment Report by UNCTAD, the inflow of FDI into Serbia rose to USD 4,3 billion in 2019, from USD 4,1 billion the previous year (+4.3%) as a result of the country’s improved business climate and equity capital growth. In 2019 the total stock of FDI stood at USD 44 billion.

Serbia is the second largest recipient of FDI among economies in transition after the Russian Federation. The European Union is the origin of 70% of investments to Serbia, followed by Russia, Switzerland and Hong Kong. According to FDI Intelligence, over the past five years, 56% of all greenfield FDI projects to Serbia have been in manufacturing. Data by the National Bank shows that FDI influx increased by 14% y-o-y in the first four months of 2019.

The ministry of economy plans to keep providing incentives to foreign investors in order to improve the business climate in the country. Factors favourable to FDI in Serbia include the economic reforms it is undergoing as part of its EU accession process and IMF agreement, its strategic location, a relatively inexpensive and skilled labour force, and free trade agreements with the EU, Russia, Turkey and countries that are members of the Central European Free Trade Agreement, for which many investors see Serbia as an export platform rather than as a market in its own right.

Serbia ranked 44th in the 2020 Doing Business report published by the World Bank, four positions up compared to the previous edition.

Serbia has these assets to attract FDI:

  • A generally positive business environment and that is much more liberal than its neighbors. This is characterised, for example, by the lowest corporate tax rate in Europe (10%). The country’s 43rd position in the¬†Doing Business¬†ranking attests to a pro-business environment.
  • A real desire for public sector reforms displayed by the government, made concrete and decisive by the various agreements reached with the IMF and the EU (which the country has been seeking to join since 2014)
  • A young workforce compared to the rest of Europe, well trained and multilingual (nearly half of the population speaks English fluently) whose cost is low.
  • A comfortable level of foreign currency reserves.

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