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Serbia: Market Profile

Picture: Serbia factsheet
Picture: Serbia factsheet

1. Overview

Serbia has passed through a period of significant change, managing a rapidly evolving political and economic landscape. The global financial crisis exposed the structural weaknesses in Serbia's economic growth model and impelled the need for fiscal consolidation and an acceleration of the ongoing transition to a market economy. Serbia's convergence process with the more developed states of Western Europe is expected to continue over the long term, with the harmonisation of the underlying domestic legal and regulatory framework with that of the European Union (EU) being a fundamental factor driving growth. This will lead to marked improvements in Serbia's business environment, enabling greater access to the export markets of EU member states and enhancing the country's appeal to foreign investors in the process.

Sources: World Bank, Fitch Solutions

2. Major Economic/Political Events and Upcoming Elections

August 2016
Prime Minister Aleksandar Vučić formed a new coalition government that continued the existing four-year alliance between the Progressives and the Socialists.

April 2017
Prime Minister Vučić won the presidency for the pro-EU Progressive Party, took office at the end of May 2017.

June 2017
Ana Brnabić was endorsed as Prime Minister.

September 2018
President Vučić and his Kosovo counterpart Hashim Thaçi met in Brussels for EU-mediated talks aimed at settling their long-standing dispute, possibly through a land swap.

Source: BBC Country Profile – Timeline

3. Major Economic Indicators

Graph: Serbia real GDP and inflation
Graph: Serbia real GDP and inflation
Graph: Serbia GDP by sector (2017)
Graph: Serbia GDP by sector (2017)
Graph: Serbia unemployment rate
Graph: Serbia unemployment rate
Graph: Serbia current account balance
Graph: Serbia current account balance

e = estimate, f = forecast
Sources: IMF, World Bank, Fitch Solutions
Date last reviewed: November 21, 2018

4. External Trade

4.1 Merchandise Trade

Graph: Serbia merchandise trade
Graph: Serbia merchandise trade

Source: WTO
Date last reviewed: November 21, 2018

Graph: Serbia major export commodities (2017)
Graph: Serbia major export commodities (2017)
Graph: Serbia major export markets (2017)
Graph: Serbia major export markets (2017)
Graph: Serbia major import commodities (2017)
Graph: Serbia major import commodities (2017)
Graph: Serbia major import markets (2017)
Graph: Serbia major import markets (2017)

Sources: Trade Map, Fitch Solutions
Date last reviewed: November 21, 2018

4.2 Trade in Services

Graph: Serbia trade in services
Graph: Serbia trade in services

e = estimate
Source: WTO
Date last reviewed: November 21, 2018

5. Trade Policies

  • Belgrade has made progress towards EU membership, signing a Stabilisation and Association Agreement with Brussels in May 2008 and fully implementing the Interim Trade Agreement with the EU in February 2010. The EU granted Serbia candidate status in March 2012. Serbia is also pursuing membership of the World Trade Organization (WTO), and the process of accession to the WTO is expected to continue during 2019.
  • Serbia enjoys preferential trade agreements with the EU and the United States, and its trade regime is under reform as it seeks to align with the requirements of EU and WTO membership. The country is in the process of completing the Draft Working Party Report for WTO accession, which spells out the agreed specific commitments that Serbia would undertake as a WTO member. In parallel to the examination of the foreign trade regime, the Serbian Working Party members are also initiating bilateral market access on goods and services within the WTO.
  • As a viable platform for customs-free exports to a market of almost 800 million people, Serbia enjoys free trade with the EU. It is also the only country outside of the Commonwealth of Independent States (CIS) that has a free trade agreement (FTA) with Russia. In January 2014, Serbia officially commenced EU membership negotiations (with full membership expected in 2020).
  • Serbia's tariff and non-tariff trade barriers affect trading partners that are mostly outside the EU, such as Russia, Macedonia and Bosnia and Herzegovina, which has the most harmful measures against it, with sectors such as cereals, processed liquid milk and other dairy products most affected. However, the Serbian government is continuing to work on improving its trade liberalisation, particularly toward eurozone-member trade partners, in its anticipation of EU accession.
  • Generally, goods imported into Serbia are subject to customs duty rates provided in the Law on Customs Tariff. These rates are ad valorem (the only exception is related to the importation of other cigarettes containing tobacco, where a combined ad valorem and specific customs duty rate is prescribed) and apply to goods originating in countries that have a most favoured nation (MFN) status in trading with Serbia. Goods originating in other countries are subject to MFN duty rates increased by 70%. At the moment, the only main trading partner with Serbia that does not have MFN status is Taiwan.
  • Customs duty rates in Serbia range from 0% to 57.6%, with most being under 30%. At the moment, the 57.6% rate only applies to cigarettes containing tobacco.
  • Serbia uses a standardised import/export documentation process (generally requiring a bill-of-lading). With the liberalisation of the trade regime and reformation of the trade/customs-related institutions, Serbia continues to synchronise its documentation with the EU.
  • Serbia's export competitiveness will be boosted by the ongoing market friendly reforms under the IMF programme, such as the privatisation, liberalisation and deregulation of the economy.

Sources: WTO - Trade Policy Review, HKTDC, Fitch Solutions

6. Trade Agreement

6.1 Trade Updates

An early announcement has been made for a bilateral trade agreement between Serbia and the Ukraine, where the terms of the agreement are currently being negotiated.

6.2 Multinational Trade Agreements


  • The Protocol on Trade Negotiations: A plurilateral Partial Scope Agreement between Serbia, Bangladesh, Brazil, Chile, Egypt, Israel, South Korea, Mexico, Pakistan, Paraguay, Peru, Philippines, Tunisia, Turkey, and Uruguay. The agreement covers goods trade and entered into force in February 1973.

  • Serbia-Russia FTA: An agreement between Serbia and Russia covering trade in goods entered into force in June 2006. Russia is a major trade partner to Serbia, which has benefitted from reduced trade barriers. The agreement stipulates that goods produced in Serbia – meaning those products which have at least 51% value added in the country – are considered of Serbian origin and exported to Russia customs free. Serbia is the only country outside the CIS that enjoys a FTA with Russia.

  • The Central European FTA (CEFTA): This is a plurilateral agreement with current signatories being Serbia, Albania, Bosnia and Herzegovina, Moldova, Montenegro, the former Yugoslav Republic of Macedonia and Kosovo. The Agreement entered into force in May 2007 and covers trade in goods, enhancing regional trade flows.

  • Serbia-Turkey Agreement: The bilateral FTA between Serbia and Turkey covers trade in goods and entered into force in September 2010. Industrial products originating in Serbia can be exported to Turkey without paying customs duties. Imports of industrial products into Serbia are generally customs-free.

  • Serbia-European FTA: The bilateral FTA between Serbia and the European Free Trade Association (EFTA), consisting of Switzerland, Norway, Liechtenstein and Iceland, entered into force in October 2010. The Agreement covers trade in goods and provides Serbia with key export markets for its primary and secondary sectors.

  • The FTA and Economic Integration Agreement: The agreement between Serbia and EU entered into force in February 2010 (for goods trade) and September 2013 (for services trade). The bilateral agreements stimulate Serbia's already large exports and imports volumes with EU member states, including Germany, Italy, Romania and Hungary.

Under Negotiation

  • Serbia-Ukraine Trade Agreement: An early announcement has been made for a bilateral Trade Agreement between Serbia and Ukraine, and is currently being negotiated. As of 2017, Serbia exported 0.6% of its total exports to Ukraine, of which plastics and plastic articles made up the highest percentage.

Sources: WTO Regional Trade Agreements database, Fitch Solutions

7. Investment Policy

7.1 Foreign Direct Investment

Graph: Serbia FDI stock
Graph: Serbia FDI stock
GRaph: Serbia FDI flow
GRaph: Serbia FDI flow

Source: UNCTAD
Date last reviewed: November 21, 2018

7.2 Foreign Direct Investment Policy

  1. There is a clear and favourable framework for foreign direct investment (FDI) in Serbia which guarantees equal treatment for national and foreign investors and sets out guidelines and incentives available for investment in certain priority sectors. The Law on Foreign Investments provides a legal safeguard for FDI. In addition to equal treatment to national investors under law, foreign investors are granted freedom to repatriate profits and protection against arbitrary expropriation. The government imposes no capital controls and investors are free to convert earnings into foreign currency, which is available at market rates. The only regulatory restrictions on FDI are imposed on defence and arms manufacturing, in which foreigners are prohibited from majority ownership, and in specified prohibited zones.

  2. In addition to this legislation, the government has established the Serbia Investment and Export Promotion Agency (SIEPA) in order to guide and encourage FDI in priority sectors through offering information, advice and incentives for foreign investors. The main industries into which the government is aiming to direct FDI include autos, business outsourcing, IT, electronics, agriculture and textiles. There are a number of incentives available to both domestic and foreign investors through SIEPA, with subsidies, tax holidays and duties exemptions all offered. The government provides generous grants for new investments, covering 50% of costs up to the value of EUR50 million, 25% of the costs between EUR50-100 million and 17% of investment costs above EUR100 million. This subsidy programme is available to new investment in manufacturing, export-led services and tourism. In order to qualify, manufacturing enterprises must be of the value of at least EUR500,000 and create 50 jobs in underdeveloped regions, or at least EUR1.0 million and provide 100 jobs in more developed areas. New investment in services must be to the value of at least EUR300,000 and provide 20 new jobs, and in tourism must be at least EUR50.0 million and create 50 jobs.

  3. The Serbian capital, Belgrade, has been named as the City of the Future for Southern Europe, based on its economic potential, cost effectiveness, human resources, IT and telecommunications, transport, quality of life and FDI promotion. That progress has been continued by many regions and cities including Vojvodina (in the north), Zajecar (in the east) and Vranje (in the south), which have been praised for their attractiveness for FDI.

  4. A corporate tax holiday of 10 years from the first year of reported taxable profit is also available for new investment in any industry of the value of at least EUR9.0 million, provided 100 new jobs are created during the period of investment. There are also incentives available for job creation. Businesses are also eligible for grants from the National Employment Service for each employee involved in the following initiatives: the Employment Subsidies Programme (EUR850-1,700), the Apprentice Programme (EUR170-210) and the Re-Training Programme (EUR850).

  5. The Serbian government is hoping to further widen the scope and opportunities for FDI by accelerating its privatisation programme, which is also a prerequisite for EU membership. Working in collaboration with SIEPA, the Serbian Privatisation Agency supplies information to and works with potential investors to inform them about the privatisation programme and related investment opportunities. Foreign participation in the privatisation process is encouraged, and there remain significant opportunities, particularly in telecommunications and metals.

  6. Regarded as one of countries showing the biggest improvement in business environment in Central and Eastern Europe between 2009 and 2013, Serbia is estimated to have passed more than 20 reforms by 2014 as part of its efforts to strengthen the competitiveness of its key industries, such as automotive, business process operations, electronics, food, ICT, textiles, wood and furniture, metalwork and machine building. To support foreign investors seeking to set up or expand in Serbia, the Serbian government has devised a holistic investment package including state grants, corporate profits tax holidays, customs-free imports and VAT exemption in free zones.

  7. Investors should be aware that the transparency of Serbia's regulatory framework remains mixed. Many government processes that affect investors are opaque and have limited opportunities for investors to consult with government regulators on measures that affect their business. Regulations can occasionally be applied unevenly and complicated bureaucracy remains a factor. However, continuing improvements will be made to Serbia's operating environment over the medium term as the country moves towards EU membership.

Sources: WTO - Trade Policy Review, Fitch Solutions

7.3 Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive ProgrammeMain Incentives Available
Companies with an international trade focus will benefit from 13 free trade zones (FTZs) located through Serbia, at Apatin, Kragujevac, Krusevac, the Nis-based Free Zone South, Novi Sad, Pirot, Sabac, Smederevo, Svilajnac, Subotica, Uzice, Vranje, and ZrenjaninThere are already 220 multinational firms taking advantage of the incentives on offer in these FTZs, which include:

- Exemption from customs duties and VAT
- Expedited customs procedures
- and competitive local logistics hubs

In addition to reducing the tax burden on businesses, FTZs are also helping to develop Serbia's industrial clusters, creating hubs for the automotive and IT industries which will make the country more attractive to international businesses.

Companies operating in any location also enjoy waived customs duties for imports of capital goods, raw materials and semi-finished goods destined for export.

Sources: US Department of Commerce, Fitch Solutions

8. Taxation – 2018


9. Foreign Worker Requirements

9.1 Localisation Requirements

Due to the high emigration levels of highly qualified young adults from Serbia, the country is flexible when it comes to importing labour to meet its market needs. There are no restrictions with regard to the number of foreign employees or length of their employment in Serbia.

9.2 Foreign Worker Permits

Investors face increasingly constrained recruitment options as a result of regional disparities in skills development, comparatively low urbanisation and high levels of structural unemployment. The dearth of skills, particularly in less urbanised areas, necessitates the import of foreign labour and additional training costs.

Work permits are required for all foreign nationals working in Serbia and are issued with a validity period of three to 12 months. The average time for obtaining a work permit is two days and can be renewed without obstacles. A foreign worker can sign an employment contract without a work permit (but with a temporary residence permit), on the grounds of performing expert work, defined by existing agreements on business cooperation, long-term manufacturing cooperation, technology transfer and/or foreign investments.

9.3 Visa/Travel Restrictions

Although Serbia has some stringent visa regulations, these are simple to follow and rarely time-consuming. Due to various visa arrangements, foreign nationals from Europe, North America, Australia, New Zealand and some parts of South America enjoy access into Serbia without a visa for up to 90 days within a 120-day period.

9.4 Religious/Cultural Barriers

Religion is practiced freely in Serbia, but the country's female labour force participation rate, at 44% of the 15 year old-plus female population, is comparatively lower than the majority of the South East European nations, even though in 2009 Serbia adopted the Law on Gender Equality.

9.5 Foreign Worker Benefits

In June 2018, a bilateral agreement between Serbia and mainland China was signed, which agrees on favourable terms to better protect social benefits of workers. The agreement stipulates that Chinese employees of Chinese companies working in Serbia will be exempt from pension and unemployment insurance contributions in Serbia, while Serbian employees and Serbian companies will enjoy the same benefits in mainland China. This agreements helps to avoid double insurance contributions and reduces investment costs to companies of both states. Once the necessary legal procedures are completed in each country, the agreement will take effect.

Sources: Government websites, Fitch Solutions

10. Risks

10.1 Sovereign Credit Ratings

Rating (Outlook)Rating Date
Ba3 (Stable)17/03/2017
Standard & Poor'sBB (Stable)15/12/2017
Fitch Ratings
BB (Stable)09/11/2018

Sources: Moody's, Standard & Poor's, Fitch Ratings

10.2 Competitiveness and Efficiency Indicators

World Ranking
Ease of Doing Business Index
Ease of Paying Taxes Index
Logistics Performance Index
Corruption Perception Index
IMD World CompetitivenessN/AN/AN/A

Sources: World Bank, IMD, Transparency International

10.3 Fitch Solutions Risk Indices

World Ranking
Economic Risk Index Rank95/202
Short-Term Economic Risk Score49.247.547.9
Long-Term Economic Risk Score48.149.752.4
Political Risk Index Rank88/202
Short-Term Political Risk Score54.258.858.8
Long-Term Political Risk Score58.364.964.9
Operational Risk Index Rank66/201
Operational Risk Score52.755.556.8

Source: Fitch Solutions
Date last reviewed: November 21, 2018

10.4 Fitch Solutions Risk Summary

Serbia has made progress in trade liberalisation and enterprise restructuring and privatisation, including telecommunications and small and medium-size firms. The country offers a strategically located and diverse economy with attractive investment opportunities in the manufacturing, IT, agriculture and business services sectors in particular, which are bolstered by the availability of generous incentive programmes.

Serbia has made some progress towards EU membership, signing a Stabilisation and Association Agreement with Brussels in May 2008 and fully implementing the Interim Trade Agreement with the EU in February 2010. Ultimately, Serbia's prospects for EU accession will come down to whether or not the government normalises ties with neighbouring Kosovo. Although Serbia will experience subdued economic growth in the short term, largely stemming from the friction of changing its growth model to export-led from consumption based, eventual EU convergence and future FTAs to be concluded give the country the potential to act as a hub connecting the EU and the CIS.

It is expected that the desire to join the EU will encourage the Serbian government to pursue a wide range of political and economic reforms, which will lead to needed improvements in the country's investment climate. Serbia appeals to foreign investors on account of the opportunities for acquiring state-owned assets. The Serbian government has announced its commitment to privatising key industries including agriculture, telecoms, real estate, shipping and energy.

Today, businesses operating in Serbia face supply chain disruptions and reduced productivity stemming from the poor quality of the transport network, prevailing regional economic headwinds and an increasingly limited pool of skilled labour. Despite notable progress in implementing internal reforms to assist its EU accession process, the country's judicial system remains weak, raising investment risks and direct legal costs. Businesses will continue to face tight lending conditions, even as austerity measures ease over the medium term. Finally, Serbia is a relatively security risk-intensive country by regional standards due to the proliferation of organised crime. Nevertheless, Serbia's medium-term outlook is significantly brighter due to improving literacy rates, low direct labour costs, public sector reforms and the country's push towards strengthening economic openness and diversification.

Source: Fitch Solutions
Date last reviewed: November 25, 2018

10.5 Fitch Solutions Political and Economic Risk Indices

Graph: Serbia short term political risk index
Graph: Serbia short term political risk index
Graph: Serbia long term political risk index
Graph: Serbia long term political risk index
Graph: Serbia short term economic risk index
Graph: Serbia short term economic risk index
Graph: Serbia long term economic risk index
Graph: Serbia long term economic risk index

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Political and Economic Risk Indices
Date last reviewed: November 21, 2018

10.5 Fitch Solutions Operational Risk Index

Operational RiskLabour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
Serbia Score56.858.5
Southeast Europe Average57.4
Southeast Europe Position (out of 12)8
Emerging Europe Average56.954.158.458.556.8
Emerging Europe Position (out of 31)19
Global Average49.6
Global Position (out of 201)66

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index

Graph: Serbia vs global and regional averages
Graph: Serbia vs global and regional averages
Operational Risk Index
Labour Market Risk Index
Trade and Investment Risk IndexLogistics Risk IndexCrime and Security Risk Index
Bosnia and Herzegovina46.045.544.348.445.9
Regional Averages57.452.857.959.459.4
Emerging Markets Averages46.848.047.545.746.0
Global Markets Averages49.649.749.949.149.8

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index
Date last reviewed: November 21, 2018

11. Hong Kong Connection

11.1 Hong Kong’s Trade with Serbia

Graph: Major export commodities to Serbia (2017)
Graph: Major export commodities to Serbia (2017)
Graph: Major import commodities from Serbia (2017)
Graph: Major import commodities from Serbia (2017)

Note: Graph shows the main Hong Kong export to/import from Serbia (by consignment)

Graph: Merchandise exports to Serbia
Graph: Merchandise exports to Serbia
Graph: Merchandise imports from Serbia
Graph: Merchandise imports from Serbia

Note: Graph shows Hong Kong exports to/imports from Serbia (by consignment)
Exchange Rate HK$/US$, average
7.76 (2013)
7.75 (2014)
7.75 (2015)
7.76 (2016)
7.79 (2017)
Source: Hong Kong Census and Statistics Department, Fitch Solutions
Date last reviewed: November 21, 2018

Growth rate (%)
Number of Serbian residents visiting Hong Kong8,572

Source: Hong Kong Tourism Board

Growth rate (%)
Number of European residents visiting Hong Kong1,929,824

Source: Hong Kong Tourism Board
Date last reviewed: November 26, 2018

11.2 Commercial Presence in Hong Kong

Growth rate (%)
Number of EU companies in Hong KongN/A
- Regional headquarters
- Regional offices
- Local offices

Source: Hong Kong Census and Statistics Department

11.3 Treaties and Agreements between Hong Kong and Serbia

  • The Agreement between mainland China and Serbia concerning the Reciprocal Encouragement and Protection of Investments entered into force in September 1996. The purpose of the agreement is to intensify the economic cooperation of both states on the basis of equality and mutual benfits through the encouragement, promotion and protection of investment.

  • Serbia has a Double Taxation Agreement with mainland China, which came into effect in January 1998.

  • In 2016, a Memorandum of Understanding was signed between the Serbian Ministry of Construction, Transport and Infrastructure and the Secretariat for Cooperation of mainland China and Central and Eastern Europe on establishing a Centre for Cooperation in the fields of transport and infrastructure between mainland China and the countries of Central and Eastern Europe.

  • In January 2017, the agreement between Serbia and mainland China on the abolition of visa requirements for holders of ordinary passports entered into force.

Sources: National sources, Fitch Solutions, UNCTAD

11.4 Visa Requirements for Hong Kong Residents

A Serbian tourist visa is not required for Hong Kong residents for a stay of up to 14 days. All travelers will need a passport valid for at least 14 days from the date of first entry into the territory of Serbia.

Source: Hong Kong Immigration Department
Date last reviewed: November 26, 2018

Content provided by Picture: Fitch Solutions – BMI Research
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