Introduction

Serbia has repeatedly been recognised as one of the fastest-growing economies in Europe and a regional leader in the emerging markets of the Western Balkans. In 2022, Belgrade was recognised as a city with the most significant economic potential, competing with the 100 largest cities in the Emerging Europe region. Serbia has topped the global FDI performance index rankings for several years as a leading investment destination worldwide.

Due to its favourable geographical location and traditionally well-developed economic relations with diverse countries and regions, Serbia has open access to a market of more than 1.3 billion people free of customs and duties. This is in alignment with the country’s industrialisation efforts, as it has the potential to serve as a hub for a broad array of trade destinations.

Economic Overview and Trends

In recent years, the Serbian economy has experienced notable growth and development. Key sectors such as information technology, manufacturing, and agriculture have driven this progress. Serbia has attracted significant foreign direct investment (FDI) primarily owing to its favourable geographic position, well-educated and highly skilled workforce, and competitive operating costs. Economic reforms to improve the business environment and enhance fiscal stability have also played a crucial role.

Serbia’s GDP growth is projected to accelerate to 3.5% in 2024 (up from 2.5% in 2023) and 4% in 2025. This surge is expected to be driven by increased private consumption, lower inflation, and higher investment. The agriculture and construction sectors are set to make substantial contributions due to recovery from previous droughts and lower real estate and construction activity in the last year.

After peaking at 16.2% year-on-year in March 2023, Serbia’s inflation has declined, reaching 5% in April 2024. It is expected to continue decreasing and return to Central Bank target levels. Prudent fiscal management remains a priority, with the 2024 budget being tight yet accommodating necessary public investments.

Manufacturing remains a cornerstone of Serbia’s economy, particularly in the automotive, machinery, and textile industries. In recent years, efforts to reindustrialise the country have brought major international companies, which has boosted production and exports. Serbia is increasingly integrating into EU supply chains, benefitting from its strategic location and free trade agreements with various global markets.

Agriculture is a traditional and vital sector of the economy. Serbia is a leading producer and exporter of grains, fruits, and vegetables. Technological innovations in the sector have contributed to greater productivity in recent years.

The construction and real estate sectors are recording rapid growth, offering significant opportunities for foreign investors in several large-scale projects expected to boost overall economic development.

Tourism in Serbia has been experiencing solid double-digit annual growth, attracting increasing international visitors. Efforts are underway to present Serbia as an attractive hub for major international conferences and sports competitions. Upcoming global events hosted in Serbia, such as the Expo 2027, are expected to boost investment in tourism infrastructure, including hotels and recreational facilities, further bolstering this growth and making tourism an even more notable contributor to the economy.

Information technology is another critical growth sector. In recent years, Serbia has become a regional centre attracting domestic and foreign investment. Exports from the industry have steadily increased in value, becoming a significantly important part of the GDP. Establishing science and technology parks in major city centres, institutes, and incubators has supported the ICT sector. At the same time, the research and development activities of major tech companies also contribute to accelerated growth.

In recent years, substantial public infrastructure investments have been made, especially in roads and railways, energy infrastructure, and healthcare facilities. Further ambitious projects are planned under the “Leap into the Future – Serbia 2027” development plan, cantered around Expo 2027. These investments are crucial for long-term growth and will focus on improving environmental infrastructure, waste management, air quality, and irrigation. Additionally, there are efforts to enhance public sector competitiveness, particularly in the green and digital transitions.

Serbia is accelerating its green energy transition, focusing on scaling up renewable energy capacity through hydropower, wind, and solar projects, primarily moving away from coal as the primary energy source. Serbia is committed to investing EUR17 billion in the sector over the next two decades. The country is also a member of the Energy Community, which brings it closer to the rules that govern the EU energy market. Aligning with the EU Green Deal objectives, Serbia aims to become carbon neutral by 2050. Significant investments are also planned in energy efficiency improvements, reducing greenhouse gas (GHG) emissions in industry, reforestation, and wastewater treatment.

Investment Environment

Serbia’s robust foreign direct investment (FDI) landscape demonstrates resilience and growth amid global economic challenges. Between 2020 and 2024, Serbia attracted a record-breaking EUR15.9 billion in FDI, with a significant portion directed towards the processing industry, which is crucial for exports. In 2023, Serbia received EUR4.5 billion in FDIs, representing about 6.1% of GDP. The sectors that have been primarily attracting investment projects include automotive (17%), agriculture, food and beverage (15%), textiles (7.5%), electrical and electronics (6.2%), and construction (5%).

Foreign investors are afforded the same status and rights as national entities and enjoy complete legal protection for their investments. The country’s Investment Act creates the general framework for investments in the Republic of Serbia. Serbia allows anyone to start a business or invest freely. Foreign investors can establish companies, subsidiaries, or representative offices and are entitled to acquire ownership rights on buildings and land under conditions equal to those applicable to domestic entities. However, establishing a company in specific sectors – namely health, pharmacy, veterinary products and services, financial services, transport, arms and munitions, insurance, gambling, construction, energy, and mining – requires specific authorisation. Foreign investors’ acquisition of agricultural land is also heavily restricted and entails fulfilment of criteria such as Serbian residency and the capability to cultivate the land. Currently, this right is exclusively granted to citizens of the EU.

Serbia has recently made significant efforts to simplify, fully digitise, and speed up the company registration process. Under the recent changes, electronic registration with the Serbian Registration Agency is now mandatory. The Serbian Business Registry ensures that the incorporation registration is decided within five days without delaying the registration approval.

Serbia values the importance of foreign investors, who can bring in fresh capital, innovative technologies, employment opportunities, and collaboration, helping local businesses thrive and boosting the overall economy. To this end, Serbia offers a robust programme of incentives to attract foreign investors, including financial grants ranging from EUR2,000 to EUR10,000 per employee for job creation in research and development, production, and services, exemptions from customs duties for importing equipment, provided it meets environmental regulations, special cash grants for greenfield and brownfield investments, a ten-year corporate income tax holiday for investments over EUR8.5 million and employing more than 100 people. The tax holiday begins once the company starts making a profit.

Serbia, therefore, offers a favourable business climate characterised by the lowest corporate tax rate in Europe for qualifying investments, at 10%, a skilled and well-trained workforce, and central geographical positioning. Additionally, the government’s proactive stance on reforms and supporting agreements with the IMF and EU further enhance the investment landscape.

Serbia is also actively expanding its international trade. In 2023, Serbia’s main export products reflected a diverse industrial base. Electrical machinery and equipment (16.6%) were prominently featured, followed by other machinery, including computers (8.6%), mineral fuels, including oil (6.1%), and metals and products, such as copper, iron, and steel. Other essential export products include rubber, plastics, vehicles, and food products, such as fruits and cereals.

This structure indicates Serbia’s increasingly integrated role in the global supply chain, particularly with the EU market, where most exports are directed. Germany is the leading destination, receiving 15.2% of Serbia’s total exports. Other notable export partners include Bosnia and Herzegovina (6.9%), Italy (6.2%), Hungary (5.5%), and Romania (5%). European Union countries accounted for 64.9% of Serbia’s exports, clearly showing the EU’s leading role in Serbia’s trade dynamics. This reflects the country’s close geographical proximity and the progressive alignment of Serbia’s economic policies and legal framework with EU standards, encouraging increased trade and financial connections.

Serbia has established a strong network of international agreements to support foreign trade and investment across diverse geographies. The country has signed 61 double taxation treaties and is committed to expanding this network to include more countries across different continents. Moreover, Serbia has established free trade agreements with countries like China, Russia, the UK, and Turkey, as well as preferential arrangements with the United States, Australia, and Japan.

Serbia also engages in numerous international and regional trade agreements that enhance its global trade relationships and economic integration. One of the key agreements is the Central European Free Trade Agreement (CEFTA), which promotes free trade within the Western Balkans region. Another significant association is the Open Balkans Initiative. Serbia, Albania, and North Macedonia seek to enhance the free movement of goods, services, capital, and labour within member states by reducing bureaucratic barriers and improving cross-border co-operation. Furthermore, Serbia has a comprehensive Stabilisation and Association Agreement (SAA) with the European Union, which determines Serbia’s EU accession process and enhances trade and economic co-operation with EU member states.

Serbia’s strategic incentives, sectoral opportunities, and ongoing reforms position it as an attractive destination for foreign investors looking to capitalise on a growing and dynamic market.

Labour Market

Foreign investors in Serbia gain a competitive advantage through the country’s highly qualified and well-educated workforce. Serbia’s education system is highly regarded, contributing to a labour pool that is both skilled and valued across various industries, including engineering, medicine, IT, construction, and agriculture. This reputation for educational excellence ensures that employees are in intense domestic and international demand.

The labour market exhibits robust performance, with the unemployment rate at 9.7% in 2023, marking a historic low. This rate is anticipated to decline further as employment growth aligns with the broader economic recovery. This positive trend is supported by increasing private sector activity and targeted programmes to boost employment.

However, unfavourable demographic trends and labour migration have become a significant concern. Serbia has responded to the increasing demand for foreign labour by updating its immigration laws, addressing labour shortages, economic expansion, and globalisation. Recent amendments to the Foreigners Act and the Foreigners’ Employment Act have introduced significant changes aimed at simplifying the procedures for foreign workers. Notable among these is the introduction of a single integrated permit for both residence and work, which can now be applied online, and a streamlined decision-making process. The amendments also extend the maximum duration for temporary residence permits from one to three years and relax conditions for obtaining permanent residency. These reforms are poised to make Serbia an attractive destination for a skilled and diverse global workforce, streamlining bureaucratic processes and promoting economic integration.

Taxation

Serbia boasts a competitive and structured tax regime that significantly influences business operations nationwide. The critical elements of this tax system include VAT, corporate income tax, capital gains tax, and personal income tax, each designed to facilitate straightforward financial planning and compliance.

The standard VAT rate is 20%. A reduced rate of 10% applies to basic foodstuffs, listed medicines, daily newspapers, hotel services, gas, the first transfer of ownership on residential buildings, etc. Finally, VAT is exempt for the export of goods, transport, and other services directly related to exports, transit, or temporary import of goods.

The corporate income tax rate is competitive, at 15%. In addition, a reduced rate of 10% for qualifying investments may apply to promote economic growth within specific sectors and regions.

Personal income tax is imposed on various types of income at flat rates. Wages are taxed at 10%, while other types of income, such as income from capital, capital gains, and other incomes, are taxed at 10%, 15%, or 20%, respectively. Individuals who exceed a certain threshold are subject to an additional annual tax.

Key Opportunities

Serbia recently secured the opportunity to host the high-profile international exhibition EXPO 2027. Serbia has taken decisive steps toward planning and implementing the exhibition and declared it a project of national significance. Preparations for the event are expected to involve a wide range of infrastructure projects, including transportation networks, public spaces, and facility upgrades with a lasting impact. The event aims to showcase Serbia’s readiness to host global events and highlight its potential as a business and investment destination.

A national development plan, “Leap into the Future – Serbia EXPO 2027”, aims to invest around EUR17.8 billion in various projects over the next few years. This includes the construction of the National Football Stadium, residential buildings, and the Expo complex itself, which will feature energy-efficient and sustainable buildings spread over approximately 70,000 square metres.

The Special Procedures Act for the International Specialized Exhibition Expo Belgrade 2027 aims to simplify and expedite procedures for construction and development, thereby ensuring efficient project implementation. This includes streamlined processes for permits and exemptions from specific fees, making it an attractive opportunity for investors. In support of this investment project of national importance, the government or the local municipality may sell construction land it owns at a price lower than the market value.

The Expo is expected to have a significant economic impact, attracting around three million visitors and having an estimated total economic impact of EUR1.1 billion. This includes direct and indirect economic effects from increased tourism, new jobs, and further investments in digitalisation, artificial intelligence, roads, railways, hospitals, and schools. Investors are advised to stay informed and take advantage of the opportunities offered by this significant event, as well as these and other benefits Serbia offers.