Our comprehensive assessment of Serbia's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Serbia, as well as the latest industry developments that could impact Serbia's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Serbia before your competitors.

Country Risk

Serbia Country Risk

Serbia Operational Risk Coverage (9)

Serbia Operational Risk

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Serbia is a relatively risk-intensive country by both regional and global standards, but does present an attractive environment for investors because of its strong economic openness, extensive regional transport links, promotion of foreign direct investment and widely available unskilled labour pool. Despite this positive outlook, there are some risks that need serious consideration, including the rise in burglaries, shaky diplomatic relations, weak and corrupt legal system, poor quality transport network and a limited skilled labour pool.

With regards to overall Operational Risk, Serbia sits in the lower third of our regional ranking, in 20 th place out of 29 countries covered in Emerging Europe. Its score of 48.7 out of 100 places the country in between Georgia and Macedonia.. Serbia's score is based on a number of indicators across various segments that contribute to the overall risk ranking. These...

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Serbia Crime & Security

Serbia Labour Market

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Investors in Serbia are exposed to elevated Labour Market Risks due to a severely inadequate education system, which has diminished the country's skilled labour pool, and high labour tax and contributions that increase the overall labour costs to business. A widely available unskilled labour pool and reforms throughout the educational system are going some way to mitigate some of these risks. Overall the country fares well in the Labour Market Risk Pillar of the BMI Operational Risk Index, in 13th place out of 29 Emerging Europe countries, with a score of 55.5 out of 100. In comparison to its neighbouring states, Serbia ranks above Bosnia in 29th place and Macedonia in 25 th place.

The higher education system in Serbia is inhibited by underfunding, which means that investors are exposed to limitations with regards to a highly skilled labour force and consequently must import foreign labour to make up the...

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Serbia Logistics

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Supply chains in Serbia must traverse an uneven transport network in terms of quality and overcome the lack of immediate port access, but will benefit from cheap and reliable utilities availability in addition to a strong trade growth outlook. In addition, the export-driven manufacturing sector is boosted by relatively quick trade lead times, which reduces costs and the risk of delays. However, extensive bureaucracy as well as relatively expensive fuel costs adds to the logistics burden. As a result, Serbia receives an overall BMI Logistics Risk Index score of 47.7 out of 100. This places the country in 18th position out of 29 emerging European countries, between Cyprus and Ukraine.

Serbia has an impressive trade outlook, emphasised by regionally outperforming export growth. The country is poised for strong growth in the medium term as demand for its manufactured goods increases, particularly from eurozone countries....

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Serbia Trade & Investment

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Investors in Serbia are exposed to avid promotion of foreign direct investment and minimal red tape, which expedites the process of starting and locating a business. The country's weak and considerably corrupt legal system, however, poses a pronounced risk to investors and depresses Serbia's Trade & Investment Risk score. As a result, Serbia is a regional underperformer for Trade & Investment Risk in BMI's Operational Risk Index, with a score of 57.7 out of 100, which ranks it 17th out of 30 countries in Emerging Europe compared to its neighbours Hungary in third place, Bulgaria in 11th place and Bosnia-Herzegovina in 25th position regionally.

Serbia's well-developed international ties, which have encouraged foreign direct investment (FDI), and strong banking sector penetration mitigate investor risk and boost its economic openness. These factors contribute towards the country's strong score of 72.0 out of 100...

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Serbia Industry Coverage (13)

Autos

Serbia Autos

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We expect the floods, which hit Serbia in May, to impact the new car market negatively in 2014 but more positively from 2015. Although the sales volume for H114 of 10,607 units is on course for our previous full-year forecast of 21,606 units, we expect new car sales to become less of a priority during the rest of the year as consumers deal with the effects of the flooding. We have increased our forecasted decline in sales during 2014 from 2% to 5%.

We have also revised our car sales growth forecast for 2015, although this is an upward revision from 2.8% to 6.0%. Examples from other countries that have been hit by natural disasters show that replacement sales for vehicles that have been destroyed begin to filter through to the market when the immediate fallout has been dealt with. However, even with this higher growth forecast, the projected market volume of 22,201 units will only just surpass the 2013 total of 22,047 units.

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Commercial Banking

Serbia Commercial Banking

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Commercial Banking Sector Indicators 
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Serbia Consumer Electronics

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BMI View:   T he Serbian consumer electronics market is one of the least lucrative in per capita terms in the region, but the low penetration rate in key device categories has nonetheless attracted global vendors. However, growth rates will remain moderate over the medium term due to the challenging economic environment. We forecast Serbian consumer electronics spending will grow just over 3 % in US dollar terms in 2014 to USD1.3 bn, and reach USD1.4bn in 2018. There is however upside potential for...

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Defence & Security

Serbia Defence & Security

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BMI View: Despite BMI 's forecast for Serbia to see modest economic growth in the medium-term period, increased austerity measures could hit defence spending. The Serbian military is still adjusting to the end of conscription in 2011 and domestic arms and ammunition producers have strong portfolios to supply the country's police and armed forces. Nevertheless, the defence sector is slowly overcoming infrastructural damage caused by past conflict with NATO and is renewing trade ties damaged by international sanctions. A November 2013, 15-year military pact with Russia will provide a major boost both practically and politically to Serbia.

Regionally, the issue of Kosovo remains a security threat, but an agreement signed by Belgrade and the Kosovan regime in early 2013 helped to defuse tensions ahead of municipal elections in the newly independent...

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Food & Drink

Serbia Food & Drink

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BMI View:   A series of planned austerity measures and high unemployment will continue to weigh on domestic demand in Serbia during 2015. The austerity measures entail reducing the size of the public sector (which accounts for close to one-fifth of the workforce), together with public sector wage and pension cuts, which will severely reduce disposable income and weigh on households' consumption sentiment. We are, therefore, forecasting overall household consumption to contract by 1.0% in 2015 and forecast 2015 total food consumption in Serbia to expand by a modest 2.1 % in local currency terms.

Headline Industry Data (local currency):

  • Total food consumption growth year-on-year (y-o-y) in 2014: +1.6%; compound annual growth rate (CAGR) to 2018: +2.3%

  • ...

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Freight Transport

Serbia Freight Transport

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Following a year in which BMI believes saw mixed trends in different freight modes, 2014 will signal slow to moderate growth across all freight modes.

Total trade is projected to pick up with our Country Risk desk forecasting a y-o-y increase of 6.15% in 2014 following an estimated growth of 7.15% in 2013.

Road freight is to grow at a highest pace, with 7% increase predicted, although rail freight is to continue to dominate the sector and is projected to grow by 1% in 2014. The sector did not manage to defy the downturn but quickly recovered its pre-2009 freight volumes, only to lose a quarter of them in 2012. However, it will be boosted by a large number of railway infrastructure upgrades.

The country finally found strategic partner for the national airline and rebranded Jat Airways as Air Serbia.

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Information Technology

Serbia Information Technology

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BMI View:   Serbia's EU candidacy will be the key driver of the IT industry over the next five years, as it brings its business environment and infrastructure in line with the rest of the Eurozone region. The landslide election of the pro-EU Progressive Party in March 2014 should help this transition and boost market growth, in particular, with the privatisation of Telekom Srbija, lowering tariff barriers for hardware and the reduction of software piracy. Serbia's strategic location in Europe and high level of technical education will also benefit the market, as it could become a regional hub for business process outsourcing. However, Serbia's economy has come under pressure as a result of devastating floods, causing a widening budget shortfall. Combined with the depreciating dinar, this could pose a major risk in the short-term as government spend on IT will be curbed.  ...

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Insurance

Serbia Insurance

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BMI View: Serbia's resilient insurance sector has key strengths. Most encouragingly, life density (premiums per capita) are developing steadily .

Key Insights And Key Risks

Serbia is a small and slowly growing national insurance market where low incomes are clearly a constraint on the development of premiums and where the business environment can be quite challenging. Perhaps most worrying, the official data indicates that non-life penetration (i.e. premiums as a percentage of GDP) will decline further through 2013.

Nevertheless, positive features are easy to identify. The regulatory regime, which is managed by the National Bank of Serbia, is sound. The new insurance law will incorporate provisions for Solvency II and other European Union norms and rules when Serbia becomes a member state. The...

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Medical Devices

Serbia Medical Devices

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Espicom Industry View: The Serbi an medical device market is expected to grow by a CAGR of 0.9 % over the 2013-2018 period, hinde red by relatively slow GDP growth. The majority of medical devices are im ported as local manufactur ers focus on disposables such as bandages and s yringes, and low-tech equipment. The government is continuing to reform the healthcare system , however . In recent years, an extensive programme of renovation has been undertaken, with the help of external...

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Pharmaceuticals & Healthcare

Serbia Pharmaceuticals & Healthcare

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BMI View:   In July, Serbia's National Health Insurance Fund   (RFZO) cut medicine prices by around 50% through a new policy, pravda.rs reported , citing Momcilo Babic, RFZO's d irector. Although criticised by the media for its new policy of lowering medicine prices,   Babic believes it means that the organisation is not working for pharmaceutical companies but for the benefit of the Serbian people. The implementation of the government's new regulation on medicine prices in the country will lead to considerable savings. This illustrates that the new Serbian government is actively trying to stabilise the country's fiscal...

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Retail

Serbia Retail

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BMI View: Serbia's retail market continues to struggle with sluggish GDP growth and a declining work force . In BMI 's Central and Eastern Europe Retail Risk/Reward Ratings, Serbia comes in eleventh and last place amongst its neighbours. Serbia's short-term growth prospects remain weak as retail subsectors expect to post disappointing figures with all sectors projected to decline in 2015.

BMI projects Serbia's total GDP to reach USD42bn in 2015. BMI projects that total retail spending will reach USD29.4bn in 2015. However, over BMI's projection period into 2018, the country's retail spending is expected to reach USD32.9bn.  Over the...

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Telecommunications

Serbia Telecommunications

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BMI View: Serbian market is not as developed as many of its Eastern European peers despite its high level of saturation. Serbia's mobile penetration peaked in 2008 at 142.9% and has been in decline since. BMI does not believe that the market has much scope in terms of new customers, instead value-added services, such as access to high speed mobile data can raise the average revenue per user for mobile operators. This is already evident by an increasing ARPU in 2014. BMI has identified mobile data as a potential area for growth, but the lack of legal framework has meant that Serbia is still taking its first steps in developing 4G. The introduction of fixed number porting option in 2014 will increase competition in the fixed-line segment. 

Key Data:

  • The  mobile  market returned to growth in...

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Water

Serbia Water

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BMI View:  Over the past quarter, there have been limited developments in the Serbian water sector. This is predominantly due to the country still suffering from the effects of severe flooding in April and May 2014. We remain of the view that Serbia's water sector is underdeveloped and in need of investment, particularly with regards to water treatment and sanitation. However, with floods having damaged existing water infrastructure and irrigation systems, repair will be prioritised over expansion.

Serbia's water sector is underdeveloped and the country suffers from poor quality water infrastructure and severe problems with industrial water pollution and wastewater management. In order to rectify this, Serbia's objectives are to increase available clean water, increase the number of connections to the public water supply system, increase overall water quality and improve water treatment plants by constructing new...

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