Despite Serbia’s government highlighting a record influx of foreign direct investments (FDI) in 2024, economists caution that the net effect of these investments is diminishing. The large outflow of profits from foreign-owned companies is contributing to a rising concern that the country’s current economic growth model, largely driven by FDI in traditional sectors like mining, agriculture, and metal production, is unsustainable.
Blagoje Paunović, president of the Fiscal Council, warned that the impact of FDI on Serbia’s economy could soon be negligible due to increased outflows. In 2024, Serbia saw FDI inflows of 6.6 billion euros, but nearly two-thirds of that amount, or 4.3 billion euros, was withdrawn in the form of profit repatriation. This trend, he warned, signals the approach of a point where the net effect of FDI becomes zero.
Economists like Pavle Petrović argue that the type of FDI currently flowing into Serbia—focused on traditional sectors—will not lead to sustainable economic growth or development. He predicts that the growing costs and limited availability of labor could lead some investors to exit, exacerbating the balance of payments deficit, which already exceeds 5% of GDP. This deficit has been partially financed by FDI, but with increasing outflows, this may no longer be possible.
Dragovan Milićević also raised concerns that the inflow of investments is no longer sufficient to cover Serbia’s trade deficit and other economic challenges. He predicts that by 2025, the country may experience a negative balance, where outflows of investment surpass inflows.
Economists emphasize the need for a new growth model that prioritizes higher-value sectors, such as technology and agriculture, rather than relying on low-cost, labor-intensive industries. They argue that Serbia’s economy must shift away from the outdated model based on traditional FDI, and domestic investments must play a larger role in driving future growth. However, the potential for domestic investment remains uncertain, with many believing that the capabilities of domestic businessmen are limited.
