Despite the economic crisis in the world caused by the covid-19 virus pandemic, Serbia has managed to maintain production capacities and prevent a significant decline in the country’s economy. The package of comprehensive economic measures adopted by the Serbian government, the favorable structure of the economy and the increased sectoral and geographical diversification of exports achieved in previous years contributed to the resilience of Serbian exports and the overall economy.
Real GDP change in 2020 was -1.1%, which appears to be one of the best results in Europe. The decline in GDP was mainly caused by the decline in activities in tourism, hospitality, passenger transport and recreational and cultural services. The reduction in construction activity and total fixed investment at the annual level was minimal. Industrial production rose by 0.2%, confirming its economic resilience thanks to strong diversification.
For 2021, the forecast indicates a GDP increase of 4%, and in the medium term, GDP growth should average 3% in the coming years. Exports of goods proved strong resistance to the pandemic last year and will be down by only 3.5% year-on-year, imports by 3.0%.
The decrease in exports of goods was mainly caused by the decrease in exports of the manufacturing industry in the context of the slowdown in global demand, however, thanks to very favorable seasonal conditions, the export of agricultural products recorded a strong growth of 5%.
The decrease in Serbian imports occurred primarily as a result of lower imports of energy and semi-finished products for further processing, while imports of consumer goods continued to grow. Inflation has remained low and stable for the seventh consecutive year and is estimated at 1.6% in 2020. The unemployment rate is approximately 9.8%. Despite the negative effects of the pandemic, a strong inflow of foreign direct investment continued, reaching EUR billion in 2020.
According to the announcement of the Serbian Ministry of Finance, in 2020, the Serbian government provided assistance to the economy and the population in the total amount of RSD 704 billion (approx. EUR 6 billion), i.e. 12.7% of GDP, as part of economic measures. For 2021, the government is currently considering an additional amount of EUR billion.
The government’s program focuses on three core sets of measures, which are focused on fiscal policy, direct support for the private sector, and measures to maintain private sector liquidity and other relief.
Post-COVID-19 opportunities for foreign exporters
The program of economic reforms undoubtedly contributes to the development of Serbia’s economy. This strategic document, which broadly reflects efforts for future membership in the European Union and the recommendations of the International Monetary Fund (IMF), is primarily aimed at maintaining financial stability, promoting higher economic growth, reducing public debt, creating jobs and improving living standards.
Structural and institutional reforms are further targeted by the Serbian government on reforms of state-owned companies, on improving conditions on the energy and transport markets, on improving the business environment, etc.
This document is followed by another important ambitious plan called “Serbia 2025”. The five-year investment plan states, among other things, the assumption of further expansion of the Serbian economy. This includes, for example, public investments in the amount of EUR 14 billion, i.e. approx. CZK 350 billion, an increase in average salaries to EUR 900/month. (from EUR 460 so far), stable exchange rate in the range of 117-120 RSD/EUR. Serbia should invest more than EUR 9 billion, i.e. CZK 225 billion, in transport infrastructure and railways.
Both of these key national documents will form the main axis for the period after overcoming the pandemic crisis.
Transport industry and infrastructure
In Serbia, there is currently an extraordinary boom in terms of building transport infrastructure. Major projects are both in the area of development of the railway network and roads, including key highways, water transport (construction and modernization of ports) and air transport (airport). These projects were not interrupted even during the state of emergency, as they are absolutely essential for the further development of the country.
An extraordinary project is, for example, the Belgrade-Budapest high-speed rail route. The project is financed from China, and therefore the opportunities to get involved are mainly in the area of subcontracting. The total value of the line, which should connect the Greek port of Piraeus with Budapest, is estimated at 2.89 billion USD.
Serbia is also implementing other projects on main and regional lines. One of the other important projects is also the modernization of 100 km of the Belgrade-Niš line worth USD 234 million. Currently, the construction of parts of road Corridor 10, which will connect the territory of Serbia with Austria, Hungary, Slovenia, Croatia, Bulgaria, North Macedonia and Greece, is also ongoing.
In Serbia, further continuity of the boom in the construction industry can be expected in the near future. Large construction projects are being implemented. The construction of the gigantic project in the center of the capital “Belgrade Waterfront” or the development projects “Avala” and “New River Port” has started. The demand for new apartments is growing, but so is the modernization of existing apartment buildings and their energy efficiency. Related to this is technology for monitoring energy and water consumption and equipment for their more efficient use.
The increase in construction production was almost 25% before the outbreak of the covid-19 crisis. This trend could resume again as early as 2021.
Water management and waste industry
During the resolution of the epidemiological crisis, the need for maximum hygiene, clean water, and waste treatment also increased significantly, not only in cities, but also in small villages and remote municipalities.
According to allcountrylist, Serbia basically lacks comprehensive ecological infrastructure, such as wastewater treatment plants and functional sewers. Even the drinking water supply system is at a level that does not even remotely meet EU requirements. There is therefore a growing interest in the supply of technologies and solutions in this area.
As the use of EU pre-accession aid expands, the volume of funds that the Serbian state administration will be forced to invest in this area will also increase. The total value of the investments is estimated at USD billion over the next 25 years.
Agricultural and food industry
During the crisis, the need for food self-sufficiency became apparent, and Serbia therefore decided to support the modernization of agricultural and food production to a greater extent. There are opportunities here both when building new farms and establishing new breedings, and when introducing new technologies for storage and processing of fruit, vegetables, meat, milk and other agricultural products.
In addition, the Serbian market is also interesting for the Czech export of milk powder, beer and healthy food products. The supply of pet food and feed products, as well as various products of plant genetics, breeding and seed breeding, also have potential here.
The Republic of Serbia, as an EU candidate country, can draw funds from the IPARD II pre-accession program, and Serbian farmers can thus request, for example, subsidies for the purchase of tractors and other agricultural mechanization, which is relatively outdated in Serbia.
In 2021, Serbia can receive up to EUR 40 million from EU pre-accession funds for agriculture. In addition to these financial resources, approximately EUR 1million from the state budget should have flowed into agriculture in 2021. Similar amounts are expected for the years 2022 and 2023.
Rail and rail transport
The modernization of the transport infrastructure is indirectly related to the modernization of the carriers’ vehicle fleet. Serbia is gradually renewing its vehicle fleet for passenger and freight transport. For the most part, the existing vehicle fleet has long outlived its standard technical and moral life span, so we can expect not only new purchases, but also (due to the difficult economic situation) more economically interesting modernization of existing means of transport.
For example, the City of Belgrade is preparing a tender for the supply of articulated buses, electric buses, trams and trolleybuses. Opportunities for subcontracting for public transport could also be in connection with the start of construction of the subway.