Successfully investing in Serbia

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last updated on 28 May 2020 | reading time approx. 2 minutes

 

 

 

How do you assess the current economic situation in Serbia?

In six years, Serbia has transformed to a stable growing economy with low inflation, also with a balanced fiscal position, declining public debt, significantly reduced external imbalances and a labour market recovery, which helped their economy to respond readily to ongoing challenges.

 

According to the National Bank of Serbia, Covid-19 and global recession will have a less severe impact than in other European countries, due to strong pre-crisis fundamentals (macro stability, growth momentum, fiscal space), large and timely monetary and fiscal packages, a favourable structure of the economy and timely implementation of lockdown measures, which allowed a earlier easing of some restrictions.

 

After slowdown in economic activity in the first half of 2019 (due to negative external effects and temporary decline in industrial production), GDP growth picked up in the second half, reaching 6.2 per cent in Q4 2019.

 

Growth continued in similar pace in Q1 2020, reaching an estimated rate of 5.0 per cent driven by high growth of industrial production, continuation of investment projects, and stable service growth, despite the Covid-19 pandemic. As in most of other countries, we expect to see effects of the pandemic largely in Q2, with V shape recovery thereafter.

 

The Government’s current economic reform program focuses on ensuring economic and financial stability, reducing debt, and creating an environment for economic recovery and growth to foster employment and raise living standards. There have been signs lately that the reform momentum has slowed. Serbia's most important trading partners are Germany, Italy, Bosnia and Hercegovina, North Macedonia, Montenegro and Austria.

 

How would you describe the investment climate in Serbia? Which sectors hold great potential?

Before the pandemic the sky was limited in Serbia. However, with all the changes (lock down and emergency state), foreign investments will be on hold, while domestic investors will try to pick up the pieces and continue to work. Still the IT industry has the greatest potential and together with construction it was not that affected as much as tourism and the entertainment industry.

 

What challenges does a German entrepreneur face when engaging in Serbia?

The Serbian specifics that a German company should consider are mainly related to the IT, construction and agriculture areas.

 

It should also be taken into account that public procedures in Serbia can often be delayed for some time (e.g. building permits, etc.). These special features should be considered and taken into account in advance. Further reasons for the dissatisfaction of investors arise from the poor payment discipline, the lack of transparency in public tenders and the low efficiency of public administration. However, all of these things have improved in recent years.

 

What effects will the relevant changes in Serbian tax law have on the economy?

The Serbian Government provided specific changes in tax laws related to Covid-19 pandemic. In order to keep employment at the normal level (unemployment was 8.9 per cent) the government provided special measures, like supporting employers with one minimal salary per employee and possibilities to postpone payment corporate income tax and social security contributions for three months. The request is not to fire any employee until 31 October 2020. Unpaid corporate income tax and social security contributions will be divided into 24 rates and will be payed from 4 January 2021.

 

In your opinion, how will Serbia develop?

As citizens of Serbia, we are hoping that the development of our State will lead to a good shape of the same, with good court jurisdiction, legal protection of human rights and stabile economy. After this goal is achieved, where we are and with whom we are is not relevant.

 

Serbia is trying to harmonize its legislation with EU legislation in order to enter into the European Union. Implemetations made are mainly focused on empowerment of legislation regarding corruption, human rights, etc.

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Slobodan Mihajlović

Tax Consultant (Serbia)

Associate Partner

+381 60 0441 381

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Radu-Dragos Dobrescu

Partner, Office head Croatia

+ 385 1 4920 468
+ 385 1 4920 455

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