Guidance

Overseas business risk: Serbia

Updated 27 June 2023

1. Overview

Serbia is a landlocked country at the crossroads of Central and Southeast Europe, with a population of 6.82 million people. With a nominal GDP projected to reach $73.96 billion in 2023, Serbia is the largest economy of the 6 Western Balkans states, and the business capital of the region.

Trade between the UK and Serbia is growing. Total trade in goods and services (exports plus imports) between the UK and Serbia was £867 million in the 4 quarters to the end of Q4 2022, an increase of 30% or £200 million in current prices from the 4 quarters to the end of Q4 2021. The UK-Serbia Partnership, Trade and Cooperation Agreement was signed in 2021.

There are significant opportunities for UK businesses in Serbia’s energy, infrastructure, transport, mining, IT and services sectors. As a candidate state for EU accession, Serbia receives significant EU development funds. Financing from International Financial Institutions such as the International Monetary Fund and the European Bank for Reconstruction and Development supports both economic reform and infrastructure development.

2. Political

Serbia is a multi-party parliamentary democracy. Legislative power is vested in the unicameral National Assembly, which has 250 seats. Elections are conducted under the proportional representation voting system. The Head of State is President Aleksandar Vučić, who was re-elected to a second presidential term as the candidate of the Serbian Progressive Party (SNS) in April 2022. The current government is a coalition of the SNS and the Socialist Party. The Head of Government is Prime Minister Ana Brnabić.

Although it began its EU accession process later than others in the Western Balkans, in September 2013 a Stabilisation and Association Agreement (SAA) came into force, which gradually liberalises trade between the EU Member States and Serbia. As of December 2021, 22 out of 35 EU negotiating chapters have been opened, with 2 provisionally closed.

The EU has stated that Serbia’s accession to the EU depends on the pace of rule of law reforms and on the normalisation of Serbia’s relations with Kosovo, mediated by the EU through the Belgrade-Pristina Dialogue. There also remains significant work to do in other policy areas such as freedom of expression and media freedom. The EU has also called for Serbia to align with EU foreign policy positions. As of June 2023, Serbia has not imposed sanctions on Russia.

Serbia agreed its second comprehensive Individual Partnership Action Plan with NATO in November 2019, although it continues to maintain its military neutrality. Serbia is currently participating in 4 UN led and four EU-led military missions, and is gearing towards participation in the first EU-led civilian mission.

The government has committed to improving regional relations, participating in various regional initiatives aiming to boost cooperation, particularly on economic issues and infrastructure. This includes the Open Balkan initiative with Albania and North Macedonia.

More information on political risk, including political demonstrations, is on FCDO travel advice for Serbia.

3. Economy

Serbia has a mixed economy, dominated by a large (and growing) services sector. Major industries include automotive, food processing, chemicals, agriculture, base metals, furniture, pharmaceuticals, machinery, sugar, car tyres and clothing. Serbia’s top bilateral trading partners are Germany, Italy, Hungary, Bosnia and Herzegovina, Romania, Russia and China.

Serbia’s economy has proven itself resilient to external shocks, from the COVID-19 pandemic to energy, inflation and supply chain pressures resulting from Russia’s invasion of Ukraine. The IMF and World Bank predict GDP growth in 2023 of 2% and 2.3% respectively.

In December 2022, the Serbian Government agreed a $2.4 billion stand-by arrangement with the IMF, requiring reform of the energy sector, state-owned enterprises, electricity pricing and the tax administration. Raising public sector efficiency and continual improvements to the business environment are also vital to Serbia’s progress towards becoming a modern, market-based economy.

Serbia’s financial sector is well capitalised and liquid with the National Bank of Serbia acting as a regulator. The level of non-performing loans (NPLs) in Serbia financial sector has reduced significantly from over 20% in 2016 to 3% in December 2022. High inflation persisted in late 2022, early 2023, reaching a peak of 16.2% in March. The National Bank of Serbia have pursued monetary tightening, with the Bank’s key interest rate set at 6% as of June 2023. Government debt to GDP was 55% at the end of 2022. Serbia’s currency is the Serbian dinar (RSD).

4. Trade and investment

Serbia is strategically located with easy access across Europe. Around 62% of Serbia’s overall trade is with the EU. Serbia also has significant trade with the non-EU member states in the Western Balkans, as well as Russia and China.

Attracting foreign direct investments (FDI) is set as a priority for the Government of Serbia, which provides both financial and tax incentives to companies willing to invest. Leading investor nations in Serbia include Germany, Italy, United States, China, Austria, Norway, and Greece. The majority of FDI is in the automotive, food and beverage, machinery, textile and clothing industries.

Around 100 companies from the UK operate in Serbia many represented through agents and distributors. Total UK exports to Serbia amounted to £364 million in the 4 quarters to the end of Q4 2022 (an increase of 38.4% or £101 million in current prices, compared to the 4 quarters to the end of Q4 2021). Total UK imports from Serbia amounted to £503 million in the 4 quarters to the end of Q4 2022 (an increase of 24.5% or £99 million in current prices, compared to the 4 quarters to the end of Q4 2021).

There are significant opportunities for UK exporters and investors in Serbia’s automotive, energy, infrastructure, mining, retail, transport and infrastructure, financial, tech and services sectors. In addition to the EU, International Financial Institutions such as the European investment Bank and the European Bank for Reconstruction and Development are key drivers of major infrastructure projects in Serbia. UK Export Finance increased its exposure to Serbia in 2021, with up to £4 billion available to support British companies in the market.

Challenges and risks to investing in Serbia include bureaucracy, corruption and slow response times from local authorities and government agencies. A key political risk is the potential for elections to be called outside of expected electoral cycles, delaying implementation of economic, energy and fiscal reforms. Regional disputes and stalling progress towards EU integration could affect investment sentiment and delay major projects.

Failure to institutionalise the fight against corruption and ensure the consistent and fair application of the rule of law for businesses is also a risk. There is potential for social unrest in the event of a drop in living standards, high unemployment, issues of regional relations, worsening environmental standards or falling public perceptions of government performance.

5. Human rights

Serbia has a legal and institutional framework in place concerning the respect of human and minority rights. However, there is a lack of a dedicated budget, while the implementation across the country is not consistent, with a particular sensitivity as regards of minorities. Additional efforts are needed to improve the situation of the most discriminated groups such as Roma, LGBT persons, persons with disabilities and other vulnerable groups.

Women hold positions at all levels of Serbian government (including ministerial positions), political parties, media and civil society, including commercial entities. A new Gender Equality Law entered into force in 2021.

Civil society activists and human rights defenders play a key role in securing a democratic environment in Serbia. However, they are often exposed to malicious campaigning by local media (including negative statements made by government officials).

The government has recently tightened control over independent bodies through both legislation and recruitment, which limits their monitoring and control role.

Freedom of speech is broadly respected, though in recent years international organisations and the EU’s annual enlargement reports have expressed concern over the lack of an environment that would enable full freedom of expression, including increased intimidation and threats to journalists. A lack of transparency in media ownership and the role of the state and of political parties in their editing remain causes for concern.

6. Bribery and corruption

Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world.

In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

The UK’s Bribery Act applies as of 1 July 2011.

Corruption can be a problem in Serbia, and is present at all levels of society. There have been various legislative moves to combat corruption, including establishment of an Anti-Corruption Agency, the adoption of an Anti-Corruption Strategy, the reforms required by Chapter 23 of the EU negotiation process and the establishment of anti-corruption taskforces and liaison officers in various institutions. However, implementation remains patchy, with very few high-profile corruption cases coming to court, and even fewer convictions, with credible claims of undue political influence on judiciary. A track record on investigations, indictments and final convictions in high-level cases of corruption remains to be developed.

According to Transparency International’s 2022 Corruption Perception Index (CPI), Serbia scored 36 out of 100 points and ranked 101st out of 180 countries. The most vulnerable sectors are public procurement, privatisation, state-owned enterprises, state-to-state deals, the health sector, other large budgetary expenditures, taxation, customs and licensing. Read our guide to reducing the risk of bribery and corruption in trade.

7. Terrorism threat

Read the terrorism threat page of the FCDO travel advice for Serbia.

8. Protective security advice

For the latest information, refer to safety and security section in FCDO travel advice for Serbia.

9. Organised crime

Crimes linked to drugs, illegal migration, human trafficking, arms trafficking, terrorism and cyber constitute a challenge for Serbia.

A primary driver for organised crime in Serbia is the country’s central position in the Western Balkans and its external borders with EU member states in the Schengen area.

In 2022, the Financial Action Task Force (FATF) noted Serbia’s progress in strengthening measures to tackle money laundering and terrorist financing. Serbia is now ‘compliant with five of the forty FATF recommendations, ‘largely compliant’ with 34 recommendations and ‘partially compliant’ with one recommendation. Serbia has no ‘non-compliant’ ratings.

Some progress has been made in reorganising the Ministry of Interior and in increasing capacity for border control. Efforts to investigate wider criminal networks and to process money-laundering cases need to be increased, as the number of final convictions remains low. Financial investigations and the concept of intelligence-led policing remain underused. Precautionary freezing of assets is rarely applied and the level of assets confiscated is low.

Independent and transparent oversight of the police is not in place. The UK actively supports Serbian law enforcement agencies, and engages in international co-operation at police and judicial level as a key component of tackling organised crime.

In the US State Department’s 2022 Trafficking in Persons Report, Serbia was categorised in tier 2, defined as ‘Countries whose governments do not fully meet the Trafficking Victims Protection Act, 2000 (TVPA)’ minimum standards but are making significant efforts to bring themselves into compliance with those standards’.

You should read HM Revenue & Custom’s guidance on crime and fraud prevention for businesses in international trade.

10. Intellectual property

Intellectual property (IP) rights are territorial, meaning they only give protection in the countries where they are granted or registered. If you are considering trading internationally, you should consider registering your IP rights in your export markets.

For information on registering your trademark or patent in Serbia, contact the Republic of Serbia Intellectual Property Office:

Kneginje Ljubice 5
11000 Beograd
Serbia
T: +381 (0)11 20 25 800
F: +381 (0)11 311 2377 / +381 (0)11 2629 483

Email: zis@zis.gov.rs

Website: www.zis.gov.rs/en/home

Read our intellectual property page.

11. Useful information

• an export guide to Serbia
• practical export advice
• export opportunities
• events for exporters and international buyers
• export finance and related guidance

12. Contact

Contact the DBT team in Serbia for further information:

Department for Business and Trade Serbia
Resavska 46
Belgrade
11000
Serbia

Email: Belgrade.Com@fcdo.gov.uk

Tel: +381 11 3060900