Whether Serbia will emerge as a winner of the nearshoring trend over the coming years will depend primarily on political developments. If Serbia stays with the EU, that may well happen
The war in Ukraine is likely to accelerate the nearshoring trend. One of the reasons nearshoring has been gaining momentum in recent years has been geopolitical tension (mainly related to China), and the war in Ukraine only adds to that. Our research has shown that the Western Balkan economies are among the first nearshoring options for German companies, due to their geographical proximity, availability of labour and low wages, but also for cultural reasons and due to the good reputation of Balkan workers. And Serbia has managed to establish itself as the region’s economic leader, attracting more than half of all FDI in the region over the last 10 years, with average FDI inflows of around 7% of its GDP in recent years, even during the pandemic. So, taking all this into consideration, one could conclude that Serbia is indeed likely to benefit from the reshuffling of the global economy that is set to come in the years ahead.
However, Serbia is facing one major challenge that brings all of this into question. That challenge relates to its policy of balancing between East and West, which will be very difficult to maintain in the coming period. Serbia is among the very few European countries that haven’t imposed sanctions on Russia (together with Bosnia-Herzegovina, Turkey and Belarus).
Our research has shown that the western Balkan economies are among the first nearshoring options for German companies, due to their geographical proximity, availability of labour and low wages, but also for cultural reasons and due to the good reputation of Balkan workers
This is not viewed very favourably by the EU, because it undermines EU efforts to ensure Russia is made accountable for its actions. It seems that the EU is letting this go unpunished for now, but strong diplomatic pressure has been applied and it is highly likely that Serbia will soon be given an ‘us or them’ choice. If that happens and Serbia decides to turn its back on the EU and side with Russia, that will lead to significant economic losses for Serbia.
Yes, Russia is an important economic partner for Serbia – with four per cent of Serbian exports heading to Russia and seven per cent of Serbian FDI coming from Russia – and Serbia did indeed receive a favourable price for Russian gas several months ago, which saves the country around 300 million euros, according to President Vučić. However, this is dwarfed by what Serbia gains from the EU – with around two-thirds of Serbian exports heading to the EU and just as much FDI coming to Serbia from EU member states. And Serbia also received around €1.5 billion from the EU budget during the 2014-2020 period, via IPA II funds.
So, whether Serbia will emerge as a winner of the nearshoring trend over the coming years will depend primarily on political developments. If Serbia stays with the EU, that may well happen.
