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It is hardly an overstatement to say that investment is every economy’s lifeblood. Its absence may inflict numerous setbacks on countries worldwide. In its turn, foreign investment is a major catalyst for economic growth, injecting capital into infrastructure projects, generating employment opportunities, and nurturing innovation. Without it, nations will be unable to finance development, which typically results in sluggish economic advancement and lower competitiveness on the global stage. Heavily reliant on foreign capital to fulfill their development objectives, developing nations would bear a disproportionate brunt of this funding shortfall. The shortage of foreign investment is likely to trigger a downturn in international trade and collaboration, exacerbating economic isolation and potentially leading to a decline in living standards.
In 2024, Serbia is a prime example of the above. Located where Central and Southeast Europe meet, the country provides great chances for investors worldwide.
Strategic location and economic landscape
Serbia’s geographical position provides seamless access to key European markets, making it an attractive destination for investors looking to tap into the European Union (EU) and other regional markets. The country’s infrastructure, although still developing, has seen improvements that facilitate trade and logistics, contributing to an environment that encourages both business and investment.
Company types in Serbia
To invest in Serbia, you will need a business of your own. Luckily, entrepreneurs and businesses have a variety of company types to choose from when establishing their presence here in 2024.
Here’s what the available options include:
- General partnership, where partners share unlimited liability.
- Limited liability company, preferred for its limited liability and flexibility.
- Limited partnership, which combines the aspects of partnerships and limited liability.
- Joint-stock company, suitable for larger enterprises capable of issuing stocks.
These entities cater to different business needs, offering a range of structures for those looking to invest or start a new venture in Serbia. Naturally, you can always remain independent as a sole proprietor. However, with this option, your opportunities for expansion are limited.
Growth of foreign direct investment (FDI)
In recent years, Serbia has experienced a steady increase in FDI. According to the National Bank of Serbia, the country attracted USD 4.5 billion of foreign direct investment in 2023, which is a clear indicator of the growing confidence that international investors have in the Serbian economy. This capital influx has been instrumental in driving the country’s economic growth, with FDI contributing to around 6.1% of Serbia’s GDP.
Sector-specific investments
The manufacturing sector, particularly the automotive industry, has been a significant recipient of foreign investment in Serbia. Companies are drawn to its relatively inexpensive yet skilled labor force, which has led to the establishment of several manufacturing plants and supply chain facilities. The construction, mining, and trade sectors have seen considerable investments as well.
The manufacturing industries are predominantly concentrated in the north, particularly around Belgrade, due to its established infrastructure, skilled workforce, and the largest market in the republic. The value added in the manufacturing market is projected to reach USD 8.71 billion, with an output forecasted at USD 31.06 billion. These investments not only contribute to the country’s GDP but also play a vital role in employment, with the manufacturing market expected to employ over 620,000 people.
Government initiatives and incentives
The Serbian government has implemented various measures to attract foreign investment, including financial incentives, tax breaks, and subsidies. These initiatives are part of Serbia’s broader economic reforms, which aim to stabilize the economy, promote fiscal discipline, and create a more favorable business climate.
Authorities in Serbia have indeed taken proactive steps to entice foreign investment through a range of incentives, including financial rewards, tax reductions, and subsidies. These measures are integral to Serbia’s wider economic reform strategy, which seeks to solidify the economy, enforce fiscal responsibility, and cultivate an advantageous business environment.
The government has set up specific incentives for job creation in research and development, production, and services, offering between EUR 2,000 to EUR 10,000 to investors. What is more, Serbia has established double taxation avoidance agreements with various countries, ensuring that investors are not taxed twice on the same income.
EU accession process and reforms
Serbia’s ongoing EU accession process has been a catalyst for economic reforms and has already improved the investment framework. The alignment with EU standards and regulations raises Serbia’s appeal as an investment destination, promising stability and a predictable regulatory environment.
Trade agreements and market access
Serbia’s free trade agreements with the EU, Turkey, and members of the Central European Free Trade Agreement (CEFTA) provide investors with a broad market reach. Many investors view Serbia not just as a market in its own right but as an export platform, using these agreements to access a wider customer base.
Innovation and technology
The country’s focus on innovation and technology has led to the growth of the tech sector, with several startups and established tech companies choosing Serbia as their base of operations. The government’s support for the tech industry, coupled with a talented pool of engineers and developers, has created an efficient ecosystem for technological advancement.
Investment climate and rankings
Serbia’s business climate is increasingly recognized on the global stage. The country ranks 53rd among 132 economies on the Global Innovation Index 2023 and 60th out of 184 countries on the Index of Economic Freedom.
Challenges and considerations
Despite the positive trends, Serbia faces challenges that investors should keep in mind. The public sector’s size and efficiency, the adequacy of road and electricity infrastructure, and the presence of a large informal economy are areas that require attention. Moreover, bureaucracy, corruption, and political interference still pose hurdles for businesses operating in the country.
Looking ahead
It is just a statement of fact that in 2024, Serbia is keeping up with economic changes and looks like a great place for foreign investment. The nation’s dedication to making progress, its key location, and expanding markets make it an attractive spot for investors wanting steady growth and success.
Serbia Wealth experts will be happy to offer you a free consultation on Serbia should you have any questions about the country or running a business there. Feel free to contact us with your queries and concerns anytime!