Judging by the trend in the first three quarters, foreign direct investments were almost halved in Serbia last year because for the first nine months the gross inflow was around 2,5 billion euros, while in the same period last year it was 3,8 billion, and for the whole of 2024 a record 5,2 billion.
The government blamed global trends and political instability in the country for the decline in investments, alluding to student and civil protests, but foreign companies operating in Serbia cite a whole range of other causes for the stagnation in investments, which "take a toll on the soul" of the country, writes Demostat.
The announced lawsuits against Serbia speak of the seriousness of the situation. The Dutch-Belgian chain Ahold Deleuze has announced that it is seeking arbitration before the International Center for Settlement of Investment Disputes (ICSID) in Washington.
The company that manages the largest retail system of Maxi and Shop&Go stores in Serbia is entering the arbitration procedure due to the limitation of margins to 20 percent for three quarters of the product range, which was introduced by the Government of Serbia last September and will be valid until February of this year.
Most consider the investment climate to be bad
That foreign companies are reconsidering investing in Serbia was also shown by a Demostat survey in which 200 companies were surveyed at the beginning of December last year and at the end of January this year using a random sample method from a list of 800 foreign investments from the NALED database from 2000 onwards.
Among the respondents are 148 companies with foreign capital and 52 with mixed capital, while classified by size, regions and activities, they reflect the structure of economic entities in the country.
According to the latest research, compared to foreign companies who consider the investment climate in Serbia to be good, there are twice as many who consider it bad or very bad.
When asked how they rate the investment climate in Serbia, twice as many, 39 percent consider it "bad" or "very bad", compared to 17 percent who say it is "good". Only one percent thinks that the investment environment is "very good", while 43 percent of companies opted for the "neutral" rating.
Such an environment affects small and micro enterprises much more, where out of the total number of respondents in that category, as many as 46,2 percent opted for the "very bad" rating, and among those who said it was only "bad", 23,1 percent are from that category of companies.
According to the industries, given that the survey was conducted in December, when the regulation on limiting margins in large markets was largely in effect, it is not unusual that the largest number of dissatisfied with the investment climate is precisely from the trade sector, which rated "very bad" in 46,2 percent of responses. This is followed by the area of services with 30,8 percent of the same answers, production in 15,4 percent and energy in 7,7 percent.
Corruption and workforce are the biggest problem
What should additionally alarm economic policy makers are the results obtained on the question of how companies evaluate the investment climate compared to the previous two or three years. Namely, in the group of companies that previously assessed the environment as "very bad", 69,2 percent believe that this year's climate is "significantly worse", 23,1 percent that it is "somewhat worse", and only 7,7 percent that it is "approximately the same".
For the first time, in response to the question "What are the biggest obstacles to investing in Serbia?" high ranking finds political uncertainty and corruption. Those two answers are particularly dominant in the group of companies that rated the investment climate as "very bad" - as many as 69,2 percent of company representatives cited it as the main obstacle.
Immediately after political uncertainty and corruption follows "macroeconomic uncertainty", "labour shortage" and "tax burden", administration and bureaucracy, poor communication with local administration.
Companies that have rated the investment climate as "neutral" are most concerned about political uncertainty, while those that have opted for a good rating are afraid of political uncertainty and lack of manpower.
This Demostat survey also confirmed that large investments should not be expected from companies operating in Serbia with foreign or mixed capital in the coming period, as 10 percent of company representatives stated that they would reduce their investments in the next three years.
While even half of all respondents said that they would maintain the current level. A moderate increase in investments is expected by less than a third of the companies, and significantly only six percent of those surveyed.
Source: Demostat
