The US State Department released its 2023 investment climate statement on Serbia, and positive takeaways includes the Serbian government making foreign direct investment a priority, low labor costs and high standards of English.
“U.S. investors are generally positive about doing business in Serbia due to the country’s strategic location, well-educated and English-speaking labor force, competitive labor costs, generous investment incentives, and free-trade arrangements with the EU and other key markets,” the report summary states. “U.S. investors generally enjoy a level playing field and can take advantage of various programs designed to attract foreign direct investment (FDI).”
That said, the report lists “challenges,” which include “bureaucratic delays and corruption, as well as loss-making state-owned enterprises (SOEs), a large informal economy, and an inefficient judiciary.”
Likewise, the report added that “political influence on the economy is also a concern; this issue was highlighted in January 2022 when the government abruptly withdrew licenses related to a major proposed lithium-mining project in response to public protests.”
Yet it should be said that the forward thinking of the current Serbian government was highlighted, with the government seen as having identified “economic growth and job creation as top priorities and has passed significant reforms to its labor law, construction permitting, inspections, public procurement, and privatization that have helped improve the business environment.”
Much, according to the US depends on follow-through, however, with the release also stating that “if the government delivers on promised reforms during its EU accession process, business opportunities should continue to grow.”
The release went on to state that “sectors that stand to benefit include agriculture and agro-processing, solid-waste management, sewage, environmental protection, information, and communications technology (ICT), renewable energy, health care, mining, and manufacturing,” but that “companies and officials have noted that the adoption of reforms has sometimes outpaced implementation.”
The report added that the “bloated public sector” is slowly being reduced, and that “Russia’s attack on Ukraine in February 2022 initially had a limited economic impact on Serbia, and the banking system remains well capitalized and liquid; but inflation surged, fueled by the increased import prices of energy and fuels, despite Serbia’s refusal to join U.S. and EU sanctions on Russian entities.”
That said, inflation has remained an issue, as “overall inflation in Serbia reached 16 percent in February 2023 y/y, fueled by food and energy prices that increased by 25 percent each, and newly built apartments by 18 percent.”
Russia continues to supply natural gas and crude oil to Serbia, but supplies are vulnerable due to heavy Russian influence in the sector and the potential effect of sanctions, the report says. Serbia’s trade with Russia is otherwise limited, but agricultural exports could suffer from contraction or loss of the Russian market due to sanctions and resulting financial and logistical barriers.
Photo of the White House by: Martin Falbisoner, CC BY-SA 3.0 <https://creativecommons.org/licenses/by-sa/3.0>, via Wikimedia Commons.