The U.S. Department of State’s Investment Climate Statements provide information on the business climates of more than 170 economies and are prepared by economic officers stationed in embassies and posts around the world. They analyze a variety of economies that are or could be markets for U.S. businesses.  The Investment Climate Statements are also references for working with partner governments to create enabling business environments that are not only economically sound, but address issues of labor, human rights, responsible business conduct, and steps taken to combat corruption.  The reports cover topics including Openness to Investment, Legal and Regulatory Systems, Protection of Real and Intellectual Property Rights, Financial Sector, State-Owned Enterprises, Responsible Business Conduct, and Corruption.

Executive Summary

Serbia’s investment climate has modestly improved in recent years, driven by macroeconomic reforms, financial stability, and fiscal discipline. Attracting foreign investment is an important priority for the government. Serbia replaced its 30-month Policy Coordination Instrument (PCI) with the International Monetary Fund (IMF) with a new two-year Stand-by Arrangement in December 2022, which provides direct assistance to the Serbian budget to cover the high cost of energy imports. The Stand-by Arrangement also reassures issuers of sovereign bonds, and Serbia likely benefits by receiving more favorable rates than it might otherwise. U.S. investors are generally positive about doing business in Serbia due to the country’s strategic location, well-educated and English-speaking labor force, competitive labor costs, generous investment incentives, and free-trade arrangements with the EU and other key markets. U.S. investors generally enjoy a level playing field and can take advantage of various programs designed to attract foreign direct investment (FDI). The U.S. Embassy in Belgrade often assists investors when issues arise, and Serbian leaders are responsive to investment concerns. In 2021, the United States and Serbia signed an Investment Incentive Agreement that facilitated a guarantee scheme for banks’ lending to small and medium enterprises. Challenges remain, particularly bureaucratic delays and corruption, as well as loss-making state-owned enterprises (SOEs), a large informal economy, and an inefficient judiciary. Political influence on the economy is also a concern; this issue was highlighted in January 2022 when the government abruptly withdrew licenses related to a major proposed lithium-mining project in response to public protests.

The Serbian government has identified economic growth and job creation as top priorities and has passed significant reforms to its labor law, construction permitting, inspections, public procurement, and privatization that have helped improve the business environment. If the government delivers on promised reforms during its EU accession process, business opportunities should continue to grow. Sectors that stand to benefit include agriculture and agro-processing, solid-waste management, sewage, environmental protection, information, and communications technology (ICT), renewable energy, health care, mining, and manufacturing. Companies and officials have noted that the adoption of reforms has sometimes outpaced implementation. Digitizing certain government functions (e.g., construction permitting, tax administration, and e-signatures) has not yet brought a dramatic improvement in processing times and may not be consistently implemented. The government is slowly making progress on resolving troubled SOEs, through bankruptcy or privatization actions where possible. The government plans to privatize 58 more companies and is also slowly reducing Serbia’s bloated public-sector workforce, mainly through attrition and hiring caps.

Russia’s attack on Ukraine in February 2022 initially had a limited economic impact on Serbia, and the banking system remains well capitalized and liquid; but inflation surged, fueled by the increased import prices of energy and fuels, despite Serbia’s refusal to join U.S. and EU sanctions on Russian entities. The overall inflation in Serbia reached 16% in February 2023 y/y, fueled by food and energy prices that increased by 25% each, and newly built apartments by 18%. Russia continues to supply natural gas and crude oil to Serbia, but supplies are vulnerable due to heavy Russian influence in the sector and the potential effect of sanctions. Serbia’s trade with Russia is otherwise limited, but agricultural exports could suffer from contraction or loss of the Russian market due to sanctions and resulting financial and logistical barriers.

Visit the U.S. Department of Department of State’s Investment Climate Statement website at https://www.state.gov/reports/2023-investment-climate-statements/serbia