Last year, the inflow of remittances from abroad in Serbia exceeded five billion euros and was higher than the total foreign investments, which at 4.4 billion euros were also a record. In relation to the gross domestic product, remittances reached 8.2 percent last year.
The National Bank of Serbia says that remittances have a countercyclical character, which means that in periods of crisis, increased global uncertainty and geopolitical tensions, they usually increase.
They also add that people who live abroad in such circumstances help their family members who live in Serbia more. The growth of remittances is also influenced by the increased number of citizens of other countries, primarily from Russia and Ukraine, who establish their residence in Serbia.
“Inflation growth in all countries during the last year led to the fact that all key macroeconomic indicators, including remittances, were nominally increased,” the NBS states.
According to the data of the central bank, the inflow based on remittances amounted to 5,028.3 million euros, which is 38.3 percent more than the inflow of 3,635.0 million euros, which was recorded in 2021.
When looking at the data for the first three quarters of 2022, the largest inflows of remittances were recorded from Germany, where almost every third euro came from, as the share of money coming from this country is as much as 27 percent.
In second place is Switzerland with 14 percent and Austria with 11 percent. The share of remittances from France and the USA is 6 percent each. These are the countries from which the majority of remittances traditionally arrive in Serbia.
Record foreign investments
According to preliminary data from the National Bank of Serbia, a new record in the inflow of foreign direct investments (FDI) was recorded in 2022, which amounted to 4.4 billion euros, which is 13.6 percent more than the previous record year of 2021. Since 2016, the Republic of Serbia has recorded a continuous increase in the inflow of foreign direct investments.
The NBS notes that this growth trend temporarily slowed down during 2020 as a result of the first earthquake since the outbreak of the corona virus pandemic, but it again recorded a record amount at that moment of 3.9 billion euros, so that in the previous three years the total an inflow of 11.3 billion euros.
They state that since 2015, the net inflow of FDI has fully covered the current balance of payments deficit, contributing to the long-term sustainability of Serbia’s external position. Last year, the trade deficit amounted to 9.35 billion euros.
Mališa Đukić, a professor at the Belgrade Banking Academy, points to this. He says that the inflow of money on the basis of remittances, i.e. foreign exchange on the basis of foreign direct investments, affects the offer of foreign exchange in Serbia, which was of particular importance last year, given that we had a growing current deficit that was a consequence of the growth of imports, i.e. the growth the price of energy.
“It adequately compensated the outflow of foreign currency from the aspect of the growing deficit within the current account of the balance of payments.
On the other hand, it showed us that Serbia is significantly dependent on the exchange rate itself, and lastly, the impact on inflation from the inflow of investments and remittances. Actually, competitiveness, i.e. the attractiveness of the country in the coming period will have one of the key roles not only from the aspect of investments, but also from the aspect of the exchange rate and will indirectly affect the movement of prices,” Đukić told Euronews Serbia.
Economists point out that money from remittances is mostly spent unproductively, that is, for maintaining standards and household consumption, and that only one to three percent of remittances are used by citizens to start a business.
According to non-ministerial data, about 25 percent of the money is used to buy real estate, which partly explains the increased demand for buying apartments and breaking records on the real estate market, which was worth as much as 7.5 billion euros.
Sign up for business updates & specials.
