Foreign direct investment (FDI) in Serbia has dropped dramatically, falling 54% compared to the same period last year. Once hailed by government officials as a key indicator of Serbia’s “economic tiger” status, FDI has sharply declined in 2025.
Official explanations from authorities have blamed student protests and road blockades, but experts point to a deeper issue: foreign investors are increasingly deterred by the lack of rule of law in the country.
According to the National Bank of Serbia, net FDI in the first eight months of 2025 totaled €1.49 billion, down 54% from the same period in 2024. Total foreign direct investments amounted to €2.3 billion, but net figures are calculated after deducting Serbian residents’ investments abroad.
Rule of law deficit drives investors away
Milan Kovačević, an expert on foreign investments, told Vreme that this decline was predictable. “This drop is very logical. Word has spread globally that the rule of law is weak here. Anyone investing abroad naturally examines how business operates, whether the law is applied fairly—so this is not surprising,” he said.
The German Chamber of Commerce noted in its annual report that 40–50% of its members cited weak enforcement of laws as the reason for not investing in Serbia. “This is exactly the core of our problem,” Kovačević emphasized.
Preliminary data for the first half of 2025 shows the largest investments went to manufacturing (23.9%), professional, scientific, technical, and innovation sectors (18.9%), construction (15.6%), and wholesale and retail trade (14.5%).
EU Investors Pull Back
Kovačević warned that even more investors, particularly from the European Union, are likely to withdraw. “Many EU investors have already pulled back. Some, like those from Cyprus, Greece, or Romania, remain, but even they may retreat over time. Our situation is now widely known, and capital must be approached cautiously,” he said.
Historically, most investments came from the EU (68.6% of total), other European countries (16.4%), the U.S. (4.1%), and the UAE (3.7%).
He also highlighted additional structural issues driving the decline in net FDI. “Our current situation has many problems. Sanctions on NIS affect all related investors. Actions taken domestically now also discourage investment. Inflation has remained high for a long time, which is another major concern,” Kovačević concluded.
Serbia faces a critical challenge in restoring investor confidence, with rule-of-law reforms seen as essential to reversing the FDI downturn.
