Serbia bucking trends; IMF noting economic gains, FDI inflows

With other countries facing contractions due in part to the war in Ukraine, Serbia appears to still be bucking expectations, with the International Monetary Fund (IMF) noting “impressive gains” in an overview released July 5.

“Serbia has made impressive economic gains over much of the past decade: living standards improved, inflation fell, public finances were strengthened, and reserves increased, helped by ample foreign direct investment (FDI) inflows,” said the statement, although that it added that “spillovers from the war in Ukraine [have] led to large external and fiscal financing needs…”

This report preceded unofficial news that over the first half of 2023 Serbian FBI showed a decisive rebound with the approximately total of EUR 2.1 bln coming in 31 percent higher year-on-year (YoY).

Serbia has proven over the course of 2023 to remain an attractive destination for foreign direct investment, which is likely a combination of relatively low employee salaries combined with a pre-EU buzz, which can later mean big profits for investors. Likewise, Serbia has become not only a destination for investment for Western companies, but also for both Ukrainian and Russian companies attempting to recalibrate due to the war.

The IMF also added that “fiscal and external outturns for 2022 were both better than expected, and unemployment remains low” and that “record FDI inflows continue to drive reserves higher.”

Everything was not roses, however, as the IMF noted also that “inflation remains a pressing challenge. Led by high food and energy prices, headline inflation is now well above the National Bank of Serbia’s (NBS’s) target band and core inflation has also increased sharply.”

Photo of the IMF headquarters by International Monetary Fund, Public domain, via Wikimedia Commons.

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