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Successfully investing in Serbia

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last updated on 6 October 2025 | reading time approx. 3 minutes

 

 

 

 

How do you assess the current economic situation in Serbia?

Serbia has a mixed economic system, in which the state plays a considerable role, but there is limited private sector freedom. Serbia is a member of the Central European Free Trade Agreement (CEFTA).

Serbia’s economic growth accelerated in the first half of 2024 leading to an increase in projected GDP growth for the year to 3.8 percent - higher than the previously forecast of 3.5 percent thanks to a stronger-than-expected performance of the construction and services sectors in the first half of the year.

Inflation Rate in Serbia is expected to be 3.0 percent by the end of this quarter, according to Trading Economics global macro models and analysts’ expectations. In the long-term, the Serbia Inflation Rate is projected to trend around 3.5 percent in 2026, according to our econometric models.

 

How would you describe the investment climate in Serbia? Which sectors offer the largest potential?

Since 2018, protests in Serbia have increased in both frequency and intensity, driven by growing concerns over political violence, the rise of authoritarianism, widespread state corruption and the erosion of the rule of law. In November 2024, a series of mass protests began in Novi Sad following the railway station canopy collapse in the city, which left 15 people dead and two severely injured. 

The Serbian economy is expected to maintain robust growth in 2025, supported by strong domestic demand and a more favorable investment environment. Household consumption (66 percent of GDP) will benefit from rising real wages, supported by increases in salaries and pensions. 

The strongest sectors of Serbia's economy are energy, the automotive industry, machinery, mining and agriculture.

 

What challenges do German companies face during their business ventures into Serbia?

German investors are generally positive about doing business in Serbia due to the country's strategic location, well-educated and English-speaking workforce, competitive labor costs, generous investment incentives, and free-trade agreements with the EU and other key markets.

Although economists are divided over whether it is economically justified for the state to grant incentives to foreign investors or not, the fact is that all European countries, and even countries inside the United States, rely on incentives when competing with each other to attract certain investments. Incentives to foreign investors are usually given in the form of various subsidies and tax breaks.

For Serbia, foreign direct investments (FDI) are significant on several levels. For a start, FDI inflows largely cover Serbia's trade deficit and help balance its payments. Without the inflow of foreign currency, Serbia's foreign exchange reserves could be depleted quickly, which would lead to a significant weakening of the dinar. Certainly, the effect on public employment is more visible to the public and it was very significant in Serbia. Employment created in that manner stimulates, through wages, local demand, which is especially important for less developed regions.

In recent years, Serbia has developed into an interesting country for German investors. Attractive funding programs, good infrastructure and, of course, the proximity of the European Union offer good arguments for direct investment. Investors worldwide need legal certainty and a good base when it comes to skilled workers and professionals. The Serbian government has addressed both areas and has made significant progress, especially in recent years. 

At the same time, the investors provide an important impetus for the economic growth and employment in Serbia. According to the studies, besides other reasons, many German companies consider investing in Serbia as part of their supply chain shortening strategies, but also are interested to invest in many other areas such as automotive industry, agriculture, green technologies, digital technologies and even tourism.

 

Does the war in Ukraine have effects on Serbia’s economy and investment climate?

After the start of Russian invasion of Ukraine in February 2022, the Serbian government reaffirmed its respect for Ukraine's territorial integrity. Serbia voted in favor of UN General Assembly resolutions condemning Russia's illegal attempt to annex four regions of Ukraine.

Germany is the largest individual trading partner with 13 percent of Serbian exports going to Germany and 13 percent of imports coming from Germany. As of 2021, companies from the EU and public entities comprise 68 percent of total foreign direct investments in Serbia (FDI). The EU is the largest emigration destination for Serbian citizens and EU businesses and Serbian businesses that are tied to the EU employ more than 900 000 workers in Serbia. 

However, political tensions due to the War in Ukraine have led to a drop in the popularity of the EU in the public. A poll conducted by the Institute for European Affairs has shown that support for EU accession in Serbia has dropped below 50 percent for the first time since the poll has been conducted, 13 years ago.
 

Are there any local differences in the implementation of applicable laws? If so, how does this affect businesses?

The legal system of Serbia is a civil law system, historically influenced by German and, to a lesser degree, French law, but in the process of the accession of Serbia to the EU, the legal system is being completely harmonized with European Union law.

Serbian business culture tends to be hierarchical. As such, respect for authority is typically highly valued. It is important to show respect to individuals in higher positions by using appropriate titles and addressing them with formal language, especially in initial interactions.

In your opinion, how will Serbia develop?

Serbia offers a unique combination of competitive advantages from its skilled workforce and attractive tax incentives to its strategic location at the heart of Europe. 

Serbia has emerged as one of the strongest economies in the Western Balkans, benefiting from a diversified industrial base, growing IT and service sectors, and strong foreign direct investment. The country has maintained stable growth rates in recent years, supported by its strategic location, skilled labor force, and trade ties with both the EU and non-EU markets, including China and Russia.

Manufacturing and IT growth:
The Serbian economy has experienced strong growth in the manufacturing sector, particularly in automotive production, machinery, and electrical equipment. The IT industry has also expanded significantly, with Belgrade becoming a regional tech hub. Government incentives for startups and foreign investors in the tech sector have driven digital transformation and boosted exports of IT services.

Structural challenges and EU accession:
Despite progress, Serbia faces challenges related to public debt, corruption, and the rule of law, which remain obstacles to EU membership. While the government has implemented reforms to improve the business environment, concerns over political interference in institutions persist. The country’s relationship with Kosovo remains a key geopolitical risk that affects investor sentiment.

Serbia’s economic outlook:
Serbia’s economy is expected to continue growing at a solid pace, driven by investment in infrastructure, digitalization, and industrial production. Future prospects depend on maintaining macroeconomic stability, further economic liberalization, and progressing toward EU accession, which would provide access to additional funding and investment opportunities.

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