There are growing risks to social and political stability in Serbia. This is due to the slowing economic growth, impending austerity measures, and persistent tensions with neighbouring Kosovo. However, Serbia’s government's credible fiscal consolidation measures and pending IMF deal will anchor investor confidence from 2015 onwards, underpinning the improvement in the country's fiscal and debt metrics.

Our coverage, using our unique Total Analysis model, ensures that our clients make sound business decisions in Serbia. Our teams keep our clients informed of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective. We also provide in-depth analysis on 13 of Serbia's most important industries. Combining interactive data and forecasting with our expert research gives our clients the complete picture. We are confident that you will find doing business in Serbia is made easier.

Country Risk

Serbia Country Risk

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Core Views

  • The outlook for Serbia's economy remains bleak as households bear the burden of structural reforms mandated by the country's credit line arrangement with the IMF. However, improving external demand will somewhat offset the impact of slumping private consumption on headline growth figures. While economic activity will continue to contract in 2015, the pace of contraction will slow, underpinning our forecast for 0.6% real GDP contraction in 2015, and modest growth of 1.1% in 2016.

  • While Serbia's fiscal deficit will remain wide in 2015, we see it gradually narrowing from 2015 onwards as the government's fiscal consolidation measures taken in accordance with the February credit arrangement with the IMF bear fruit. The IMF deal will be an anchor for investor confidence and a driver of reform momentum, implying that the potential for a...

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Serbia Operational Risk Coverage (9)

Serbia Operational Risk

Serbia Crime & Security

Serbia Labour Market

Serbia Logistics

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BMI View: Supply chains in Serbia must traverse an uneven transport network in terms of quality and overcome the lack of immediate port access, but businesses will benefit from cheap and reliable utilities availability. 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 47.9 out of 100. This places the country in 19th position out of 29 Emerging European countries, between Albania and Azerbaijan.

Businesses in Serbia benefit from an extensive, low-cost and generally reliable utilities market, which significantly boosts the country's appeal to investors. The cheap and...

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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)


Serbia Autos

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Over the past quarter, BMI has become more pessimistic on the near-term outlook for auto sales in Serbia. We are now targeting an 8.6% drop in new vehicle sales over 2015, with the passenger car segment (-10%) underperforming what may be a 5% rise in commercial vehicle sales over the full year.

The main reason for our downbeat stance towards Serbian auto sales at present remains the country's worsening macroeconomic backdrop. Serbia's real GDP contracted by 1.8% in 2014, close to our estimation of -2.0%. Economic activity was dragged down by the spring and summer floods, which damaged infrastructure, housing and production facilities. Looking forward, the standby credit line arrangement with the IMF, which entails harsh austerity measures, will further exacerbate the outlook for domestic demand in 2015 and 2016.

Unfortunately for the autos sector, we believe that private...

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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: The 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. Growth rates will remain moderate over the medium term due to the challenging economic environment and continued negative GDP growth in 2015 will weigh heavily on this sector. We forecast Serbian consumer electronics spending will grow just 0.6% in US dollar terms in 2015 to USD1.25bn, and reach USD1.44bn in...

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Defence & Security

Serbia Defence & Security

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We expect Serbia to spend up to USD988mn on defence in 2014. On average, since the start of this decade, between the years 2011 and 2013, Serbia has spent an average of USD918.3mn on defence annually. We expect defence spending to fluctuate for the remainder of our forecast period, up to and including 2019, with Serbia spending an average of USD1bn on defence throughout this period. Defence spending in Serbia is expected to reach USD1bn by 2019.

Serbia maintains a significantly sized defence industry, considering the size of the country. This is a legacy from Yugoslavia's status as a non-aligned power during the Cold War, when a policy of self-sufficiency in armaments product was maintained. The country's defence industry makes significant exports of materiel around the world. In particular, it is a supplier of reliable yet comparatively inexpensive small arms and light weapons to many countries throughout Africa, and also in the Asia-Pacific...

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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. A sputtering recovery in the eurozone, and a looming recession in Russia will suppress exports, prompting us to forecast economic contraction for Serbia for 2015 of 0.7%. We are forecasting overall household consumption to contract by 1.0% in 2015 and also forecast total food consumption in Serbia to expand by only a modest 1.1% in local currency terms over the same period.

Headline Industry Data (local currency):

  • Total food...

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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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Serbia Insurance

Medical Devices

Serbia Medical Devices

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BMI Industry View: The Serbian medical device market is expected to grow by a CAGR of 0.9% over the 2013-2018 period, hindered by relatively slow GDP growth. The majority of medical devices are imported as local manufacturers focus on disposables such as bandages and syringes, 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: A demand for austerity measures and public sector cuts by the IMF and the ongoing privatisation of state-owned enterprises will push the Serbian government to reduce its fiscal expenditure. The national health insurance fund will be pressured into reining in its costs, and we expect it will use its purchasing power to extract discounts from pharmaceutical manufacturers. The outlook for the Serbian pharmaceutical market in 2015 is expected to worsen.

Headline Expenditure Projections

Pharmaceuticals: RSD92.43bn (USD1.045bn) in 2014 to RSD97.15bn (USD0.872bn) in 2015; +5.1% in local currency terms and -16.6.% in US dollar terms.

Healthcare: RSD398.91bn (USD4.51bn) in 2014 to...

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Serbia Retail

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BMI View: We expect that the Serbian retail sector will not begin to recover considerably in 2015 as the country continues to face numerous economic problems. Total household spending is anticipated to grow at stable rates in dinar terms; however, the appreciation of the US dollar will deflate the total household spending figure in USD terms. Despite the slowdown, however, the market will continue to diversify.

A candidate for EU membership, Serbia has one of the closest economic and political ties with Russia among all of the European countries. When the members of the EU have firmly decided to impose sanctions on Russia due to the Ukraine crisis, the Serbian government hesitated and remains highly approving of...

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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 2013...

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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 ones...

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