Germany, once the largest investor in Serbia, is no longer among the top investors in the country, as foreign direct investment (FDI) from Germany has significantly decreased. This year, Germany did not even make it into the top ten countries investing in new factories, and its investments in existing plants have been almost nonexistent.
The structure of foreign investments in Serbia has undergone a dramatic shift. According to the National Bank of Serbia (NBS), the largest foreign investments now come from China, which, together with Hong Kong, Taiwan and Macau, has contributed 697.9 million euros. The Netherlands and Luxembourg, both considered tax havens, follow in second and third place with 527.8 million euros and 312.3 million euros, respectively. Serbia’s President, Aleksandar Vučić, has instructed government ministers to focus on attracting more foreign investments from Asian markets, particularly China, Korea and Japan, pointing to Hungary’s success in securing 15 billion euros in investments last year from these countries.
In the first ten months of 2024, Serbia saw 4 billion euros in FDI, a 5.6 percent increase compared to the previous year, with preliminary data for November pushing that number to 4.5 billion euros. Notably, the UK, Czech Republic, Austria, USA, Andorra, Russia and Switzerland also contributed significant investments.
The decline of German investments in Serbia
Germany’s once-dominant role in Serbian investment appears to be waning. Data from the German Central Bank shows that total German investments in Serbia still exceed 2.5 billion euros, with German companies having created around 80,000 jobs. However, recent years have shown a decline, particularly in new investments. Experts attribute this to multiple factors, including changing market dynamics, especially in the automotive sector, where competition from China has intensified. Additionally, a decline in business optimism and Serbia’s increasingly risky market perception in German business circles may also be contributing factors.
Political and economic factors
Professor Dušan Marković from the Faculty of Economics in Belgrade notes that the drop in German investments can be partly attributed to political factors, such as strained relations with the German government and the broader economic uncertainty in Europe. As some companies are pulling profits back to their home countries during uncertain times, reinvestments in markets like Serbia have slowed.
Shifting focus to Asia
Slobodan Aćimović, another professor at the Faculty of Economics, suggests that this shift in investment patterns is a natural consequence of changing global dynamics. He emphasizes that Serbia must prioritize its own interests and focus on expanding exports and attracting foreign investments from various regions, including Russia and Asia. He acknowledges that while the EU remains important, Serbia should not rely solely on European markets, especially given the ongoing economic challenges in the EU and the geopolitical uncertainty stemming from the war in Ukraine.
Professor Marković also points out that Europe is entering a period of stagnation, with much of its growth driven by post-2008 crisis recovery. He predicts that Asia, particularly China, will become the new economic engine, and Serbia must position itself to benefit from this shift. China’s investments in Serbia are already significant, particularly in the mining sector, though these may not continue at the same pace once the current projects reach completion.
The NBS has cautioned that investment data should be interpreted with caution, as the dynamics of investment projects can vary throughout the year. Moreover, companies often report reinvested profits in the latter half of the year, which may lead to a different final picture of FDI inflows for 2024.
