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New Approaches Reinforce Economic Growth

Announced easing inflation and faster economic growth hints at the possible accelerating of economic activity. This in turn creates room for the Government of the Republic of Serbia to place a greater focus on improving the business climate and strengthening its dialogue with the business community

Agency Fitch Ratings recently confirmed Serbia’s credit rating at the BB+ level. Despite Serbia having yet to receive an investment rating, this ratings decision reflects positive economic factors and the progress achieved by the country regardless of the extremely unfavourable global trends that have also manifested on the domestic business climate. Contributing the most to this rating are a credible economic policy, increased economic activity, improved administration, regulated public finances and the level of development of human resources compared to countries with a similar rating. 

Despite the challenges of external demand, Serbia has succeeded in preserving its stability, attracting significant direct investments and achieving growth on exports. 

Announced falling inflation and projections indicating an improved external position further contribute to the forming of a favourable picture. Moreover, the country’s fiscal deficit is also expected reduce, while public debt should remain at a level below 50% of GDP, which further buttresses macroeconomic stability. 

GDP is expected to enjoy further growth, driven by rising exports, an improved agricultural season and positive trends in the services sector. These are key factors that could support the achieving of higher rates of economic activity. 

Completing this positive picture are the views of representatives of international financial organisations, representatives of the Foreign Investors Council, individual companies and members of the Government of Serbia.

The FIC has addressed the vital issues of digitalisation and adherence to ESG principles over the past year, but also Serbia’s shift towards more sustainable agriculture development and environmental protection

It firstly seems that significant room for improvement still exists in Serbia when it comes to advancing the business climate and removing obstacles to further development internally. Although several new laws have been adopted and existing ones updated – such as the Law on Safety and Health at Work, amendments to the Law on Foreigners, the Law on the Employment of Foreigners and others – there has been a lack of significant activity in the country on the harmonising of regulations with the EU acquis. Furthermore, there are serious hindrances when it comes to the implementing of a large number of regulations. This is also reflected in the slowing dynamics of the adoption of recommendations provided in the FIC White Book. 

Secondly, certain areas are progressing in an unbalanced way. The recent FIC conference on financial services provided an example of good cooperation with the National Bank of Serbia, which has resulted in the introduction of numerous useful innovations for the benefit of the economy and citizens. In contrast to this, when it comes to the areas of the food sector and tax regulations, only slight advances have been recorded in terms of both dialogue and results. 

Thirdly, the top investors in Serbia are also leaders on activities that steer the country towards an improved business culture. Among corporations, ESG reporting is becoming increasingly important, with these aspects prompting responsible companies to join efforts aimed at preserving the wellbeing of workers and local communities. The FIC’s well-attended conference was dedicated to this specific topic and the launch of implementation of the Due Diligence Act in Serbia. 

Fourthly, the number of investments in Serbia’s innovative sectors is on the rise, but so is awareness of the necessity and obligation to shift the business community towards sustainable operations. One such example is the introduction of the principle of regenerative agriculture. Recognising the necessity of introducing new business practices, the FIC – as a leader in advancing Serbia’s business climate – is organising a conference on this topic in late September.

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