Foreign direct investment in Serbia in April, when the world was hit by the health crisis, was reduced by over 30%, said the chief economist of the Fiscal Council, Danko Brcerevic.
He told Beta that in April this year, net foreign direct investments in Serbia amounted to 240 million euros, and that in the same month in 2019, those investments amounted to 355 million euros.
– This declining trend of direct foreign investments will continue and that is why it is necessary to create conditions for the growth of domestic private investments – said Brcerevic.
He added that in that way, the shocks in economic growth will be reduced in big crises when foreign direct investments fall.
– Total investments, foreign and domestic in Serbia even before the crisis were not enough for higher economic growth and only in the last two years exceeded 20% of gross domestic product (GDP), and in Central and Eastern European countries in a period of significant growth were 25% GDP – said Brcerevic.
In addition, in Serbia, according to him, within the total investments, there is a great asymmetry between domestic and foreign investments.
In the countries of Central and Eastern Europe, it is common, as he said, that foreign investments make up 5% to 6% of GDP, and in Serbia in the last three years they were more than 7% of GDP, which means that domestic investments private sector extremely low.
The reason for the small investments of the domestic private sector is, as Brcerevic said, the unfavorable economic environment, above all high corruption and insufficient rule of law, which is why domestic entrepreneurs refrain from investing.
The state to increase its investments in infrastructure
– Foreign direct investments in Serbia are above average, because these companies are oriented, not to domestic but to foreign markets, because they have at their disposal state agencies that help them deal with domestic bureaucracy, and often use tax breaks and state subsidies for job creation – said Brcerevic.
Now that, according to him, it is almost certain that foreign direct investment due to the crisis will not be enough to help economic growth for some time, a good policy for 2021 would be for the state to increase its investments in infrastructure to compensate for that deficit.
In crises similar to this one, he said, it shows how important a stimulating environment is for domestic private investment: the rule of law and an efficient judiciary, anti-corruption, built infrastructure and other preconditions so that Serbia does not depend so much on changing conditions and shocks on the international market, Beta reports.
