The National Bank of Serbia expects a similar influx of foreign direct investment (FDI) this year as in the previous year, amounting to approximately 4.5 billion euros. In January alone, foreign companies invested 562.2 million euros, significantly more than in the same period last year. The NBS cautiously projects FDI inflows for 2024 at levels similar to those of the previous year, evaluating all movements conservatively.
According to the NBS, FDI in Serbia has consistently surpassed their projections in recent years, reaching record levels almost annually. In 2023, FDI amounted to 4.5 billion euros, marking a two percent increase compared to the record-breaking 4.4 billion euros in 2022. This continuous growth over the past decade is attributed primarily to maintained macroeconomic, financial, and fiscal stability, improvements in the overall investment climate, structural reforms, and favorable economic prospects.
The sustained upward trend of FDI in Serbia has persisted despite increased global uncertainty and crises faced worldwide in recent years, indicating Serbia’s attractiveness as an investment destination and foreign investors’ willingness to engage in long-term investments in the country, the NBS noted.
Furthermore, the net inflow of FDI has entirely covered the current account deficit, contributing to the long-term sustainability of Serbia’s external position.
European (68.1%) and Asian (30.2%) countries accounted for the largest inflow of FDI into Serbia during the first three quarters of 2023, according to the latest available data.
In terms of countries, China (818.4 million euros), the Netherlands (622.5 million euros), the United Kingdom (217.4 million euros), Austria (215.9 million euros), and Germany (158.6 million euros) recorded the highest FDI inflows into Serbia during the first three quarters of 2023. It is important to note that significant investments from the Netherlands are due to certain foreign investors channeling their investments through Dutch subsidiaries for tax benefits, even though the parent company’s headquarters may be located elsewhere.
Maintaining geographic and project diversification, FDI in Serbia remains project-oriented. The majority of investments are directed towards export-oriented sectors, contributing to the growth of Serbia’s exports of goods and services. The manufacturing industry (29%), mining (11.2%), and professional and technical activities (9.3%) continue to attract the largest share of investments. Focusing on export-oriented sectors is crucial for job creation, increasing export capacities, and preserving existing employment opportunities.
Serbia outperforms its regional counterparts in terms of FDI inflows, as highlighted in the latest Quarterly Monitor issued by the Foundation for the Advancement of Economics, Faculty of Economics, University of Belgrade. The dominance of investments in export-oriented sectors is confirmed, with the highest investments directed towards the industry, partially in mining, trade, and construction.
Despite these positive trends, it is anticipated that FDI inflows may decrease in 2024 due to expected sluggish economic growth in EU countries, high interest rates, reduced tax incentives for EU companies investing abroad, rising business costs in Serbia (including relatively high wage and energy price increases in euros), and insufficient supply of certain categories of labor.
Impact of FDI on Exports: In 2023, FDI inflows were more than double the current account deficit, resulting in a significantly higher supply of foreign currency than demand, according to Milojko Arsić, a professor at the Faculty of Economics. Serbia achieved its lowest current account deficit relative to GDP since 2001, primarily due to improved economic competitiveness resulting from productive production mainly in foreign companies, as well as favorable prices in the global market.
