
Foreign Direct Investment
FDI flows have been positive since 2012. According to the 2021 World Investment Report by UNCTAD, FDI inflows fell by 19% in 2020, from USD 4.3 billion in 2019 to USD 3.4 billion, as a result of the global economic crisis triggered by the Covid-19 pandemic. In 2020, the total stock of FDI stood at USD 51.8 billion. The COVID-19 crisis mainly affected reinvested earnings. The economic downturn also affected export-oriented activities, as problems in GVCs, of which Serbian companies were an integral part, led to production disruptions. The manufacturing sector was the most affected by the decline in FDI, including machinery and equipment, metallurgy and rubber and plastic industries. Despite the disruptions in trade and GVCs, the automotive industry still recorded some expansions, such as that of the Magna Seating plant and Cooper Tire & Rubber (US). In the services sector, the decline in FDI also affected a wide range of activities, including construction, trade and transport and storage. Nevertheless, Serbia remains the second-largest recipient of FDI among transition economies after the Russian Federation. The European Union is the origin of 70% of investments in Serbia, followed by Russia, Switzerland and Hong Kong. However, inflows from various FDI source countries, including Austria, Germany and Hungary, as well as the Russian Federation and the United States, decreased significantly in 2020. According to official sources, Serbia attracted USD 4.4 billion of foreign direct investment in 2021, which contributed to the opening of production plants in Zrenjanin, Indjija, Backa Topola, Belgrade, Aleksinac and Subotica, creating a total of 12,490 jobs.
The ministry of economy plans to keep providing incentives to foreign investors in order to improve the business climate in the country. Factors favourable to FDI in Serbia include the economic reforms it is undergoing as part of its EU accession process and IMF agreement, its strategic location, a relatively inexpensive and skilled labour force, and free trade agreements with the EU, Russia, Turkey and countries that are members of the Central European Free Trade Agreement, for which many investors see Serbia as an export platform rather than as a market in its own right. New tools have been introduced to keep free economic zones attractive, including health protection measures, lower rents and a shift of transactions and meetings online as much as possible. By contrast, the country’s main weaknesses are a massive and inefficient public sector, low productivity (excluding automotive), inadequate road and electricity transport infrastructure, and a large informal economy. Besides, the business environment remains hampered by red tape, corruption and political interference. Serbia ranked 44th in the latest Doing Business report published by the World Bank, up by four positions compared to the previous edition.
Foreign Direct Investment | 2019 | 2020 | 2021 |
FDI Inward Flow (million USD) | 4,270 | 3,469 | 4,563 |
FDI Stock (million USD) | 43,826 | 52,220 | 52,775 |
Number of Greenfield Investments* | 114 | 42 | 44 |
Value of Greenfield Investments (million USD) | 4,172 | 1,842 | 1,488 |
Source: UNCTAD - Latest available data.
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
Country Comparison For the Protection of Investors | Serbia | Eastern Europe & Central Asia | United States | Germany |
Index of Transaction Transparency* | 6.0 | 7.5 | 7.0 | 5.0 |
Index of Manager’s Responsibility** | 6.0 | 5.0 | 9.0 | 5.0 |
Index of Shareholders’ Power*** | 5.0 | 6.8 | 9.0 | 5.0 |
Source: Doing Business - Latest available data.
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.
