According to recent data from the economic bulletin MAT, Serbia has experienced a record inflow of foreign direct investments (FDI) in 2024, amounting to approximately four billion euros in the first ten months. However, there was also a substantial outflow, primarily from primary income expenses related to FDI, which amounted to about 3.5 billion euros. As a result, the net FDI inflow into Serbia stood at 485.5 million euros. This represents a decrease of 561.6 million euros, or 53.6%, compared to the same period in 2023.
The analysis of the outflows to foreign investors reveals the following breakdown: about 2.3 billion euros were outflows related to dividends, 331.3 million euros were outflows related to interest payments, and 885 million euros were outflows from reinvested earnings, i.e., retained profits of foreign-owned companies that were not distributed to owners.
The Serbian Statistical Office is expected to release the full 2024 data by the end of January, which will provide more details on the business operations for the entire year. The MAT authors will analyze these figures as well.
Meanwhile, in the first 2025 issue of MAT (Monthly Analyses and Trends), prepared by the Serbian Chamber of Commerce and the Belgrade Institute of Economics, the details concerning FDI and portfolio investments (PI) are highlighted.
In the section of MAT related to the state financial account, the structure of financial transactions in Serbia for the first ten months of 2024 is explained. It is noted that from January to October 2024, the net inflow from financial transactions amounted to 3 billion euros (precisely: 3,006.7 million euros), which is an increase of around 2.3 billion euros (precisely: 2,343.0 million euros), or 353.1%, compared to the same period in 2023, when the net inflow was 663.7 million euros.
The MAT analysis points out that this inflow primarily came from foreign direct investments, net government and corporate borrowing through financial loans, a reduction in net corporate trade receivables, and government and corporate borrowing through debt securities issuance (bonds).
According to MAT analysts, the net FDI inflow, which represents the difference between FDI inflows into Serbia from non-residents and outflows of FDI from residents to other countries, amounted to about 3.5 billion euros from January to October 2024 (a 0.5% increase).
The inflow of FDI from non-residents into Serbia from January to October 2024 reached about four billion euros (precisely: 3,982.9 million euros), an increase of 210 million euros, or 5.6%, compared to the same period the previous year.
Outflows from FDI
The analysts note that, to fully understand the effects of FDI, it is important to consider that the total outflow of primary income related to FDI was about 3.5 billion euros (precisely: 3,497.3 million euros), of which approximately 2.3 billion euros (precisely: 2,281.1 million euros) was related to dividends, 331.3 million euros to interest payments, and 885 million euros to reinvested earnings (retained profits of foreign-owned companies not distributed to owners).
When the inflow of about four billion euros (precisely: 3,982.9 million euros) from FDI into Serbia is adjusted for the total outflow of primary income expenses from FDI (about 3.5 billion euros), the net FDI inflow for the first ten months of 2024 stands at 485.5 million euros. This represents a decline of 561.6 million euros, or 53.6%, compared to the same period in 2023.
In terms of the total inflow of FDI from non-residents into Serbia (3,982.9 million euros), the share of equity investments, including reinvested earnings, decreased from 78.6% to 76.2%, while the share of intercompany loans increased from 21.4% to 23.8%.
A higher share of equity investments compared to intercompany loans is considered favorable since interest payments on intercompany loans represent a cost and are not taxable, unlike dividends from equity investments, which are profit and subject to taxation.
It is also worth noting that, unlike intercompany loans, equity investments do not count towards the country’s gross debt, as explained in MAT’s January issue.
Portfolio investments – New government and telecom debt
In the MAT analysis regarding portfolio investments (PI), it is noted that the net inflow from portfolio investments, which includes investments in equity and debt securities, amounted to 653.5 million euros (a 33.2% decrease compared to the same period in 2023).
This net inflow primarily resulted from the Serbian government’s debt issuance on the international financial market. In June 2024, Serbia issued 1.5 billion USD in ten-year sustainability bonds. Additionally, in October 2024, Telekom Srbija issued five-year bonds on the Dublin stock exchange, raising 900 million USD. This marked the first time a Serbian company entered the international financial market in this way.
It is also worth mentioning that between January and October 2024, there was a significant increase in outflows from portfolio investments, which amounted to 776.9 million euros (compared to an inflow of 4.1 million euros in the same period of 2023). This was primarily due to investments by domestic business banks in debt securities and investments by domestic companies in equity and debt securities.
