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Energy price reductions boost Serbia’s business competitiveness

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Unlike last year’s May Day, which saw a new surge in electricity and gas prices, this year’s May brought relief to energy-consuming businesses. Elektroprivreda Srbije (EPS) reduced electricity prices for businesses by around 20%, while Srbijagas slashed gas prices by 15%. These reductions came after significant drops in energy prices on the market. Moreover, the decision to cut energy prices for businesses was endorsed by the International Monetary Fund (IMF), seeing it as vital for maintaining Serbia’s competitiveness.

Businesses in Serbia welcomed the move, emphasizing that lower energy costs attract foreign investors and encourage foreign companies to source materials or products from Serbian firms. Dragoljub Rajić, Coordinator of the Business Support Network, highlighted that over the past two years, rising energy, labor, and import costs led to decreased orders in Serbian companies, affecting their competitiveness in Eastern European markets.

Last year’s electricity price hikes stripped Serbia of its status as having the cheapest electricity in Europe, as indicated by Eurostat data for the second half of 2023. Despite this, Serbia remains competitive in gas prices for industry compared to other European countries. However, challenges persist, such as frequent voltage drops, the excise duty on electricity, slow approval processes for infrastructure, and costly gas connections, all impacting businesses’ operational costs.

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The significance of low electricity and gas prices lies in enhancing Serbia’s appeal to foreign investors, who factor in operational costs when choosing between Serbian and EU-based suppliers. Competitive energy prices make Serbian companies more attractive partners, offsetting potential risks associated with longer legal processes and trade disputes.

Addressing these challenges is crucial for sustaining Serbia’s economic competitiveness and attracting foreign investment. By ensuring affordable energy prices and streamlining regulatory processes, Serbia can position itself as a favorable destination for businesses seeking cost-effective manufacturing and production solutions.

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