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.

Serbia Country Risk

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Core Views

  • Serbia's ruling Progressive Party (SNS) emerged as the winner of the April 24 general election, which will reaffirm public support for Prime Minister Aleksandar Vucic's austerity agenda and structural reform programme. The principal political threat to the current Serbian government is from abroad. Ethnic tensions are threatening the stability of Bosnia and Herzegovina and poor relations with Croatia are delaying Serbia's EU accession. Domestically, with its large majority in parliament, the government is tasked with ensuring that it implements its own manifesto effectively and overcomes the political protestations of the newly elected right-wing parties.

  • The recovery of Serbian real GDP growth will consolidate in 2017 and 2018 on the back of rising consumer spending and less severe government austerity. Growth will...

Serbia Operational Risk Coverage (9)

Serbia Operational Risk

BMI View:

BMI View: Serbia is a relatively risk-intensive country by regional standards due to the proliferation of organised crime and significant ethnic and interstate tensions that have negatively contributed to complicate diplomatic relations with regional peers such as Croatia and Kosovo. Businesses face supply chain disruptions and reduced productivity stemming from the poor quality transport network, prevailing economic headwinds and a limited pool...

Serbia Crime & Security

BMI View:

BMI View: Serbia's major crime and security risks stem from the ongoing refugee crisis inflaming nationalist tensions and heightened risk of terrorism. Meanwhile, significant police corruption, operational inefficiency combined with the prevalence of organised, financial and petty crime contribute to heightened security and insurance costs for businesses, compared to other countries in the region such as Poland, Croatia and Slovenia. Though cyberdefences and military capabilities are low, international assistance and training programmes are seeking to get Serbia's various security bodies up...

Serbia Labour Market

BMI View:

BMI View: Investors in Serbia are exposed to elevated labour market risks due to an uncompetitive and unequal education system, which has exacerbated skills gaps in the labour market giving way to high levels of structural unemployment and the economic exclusion of minority groups. Labour costs are heightened by poor hiring and firing practices, compounded by high labour tax and contributions that further raise operating costs. The size of the Serbian labour market faces increasing risks from the ongoing demographic shift characterised by an ageing labour pool and declining population. This state of affairs offsets the benefits...

Serbia Logistics

BMI View:

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, relatively high fuel costs and water scarcity-related challenges add to the logistics burden and we see scope for these risks mounting as global oil prices recover and weak water management systems exacerbate water scarcity over the medium term. As a result, Serbia receives an overall BMI Logistics Risk Index score of...

Serbia Trade & Investment

BMI View:

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...

Serbia Industry Coverage (13)

Serbia Autos

BMI View:

BMI View: We believe that a combination of low interest rates and an increase in fleet renewal from business should lead to further measured growth for the Serbian new vehicle sales market in 2016, although sales growth will not be as strong as that seen in 2015. We are targeting 5% sales growth for the sector as a whole, with commercial vehicles set to outperform passenger cars.

Passenger Car And Light Commercial Vehicle Sales
f = BMI forecast. Source: Vrele Gume, BMI
Key Views

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

Serbia Consumer Electronics

BMI View:

BMI View: After a significant decline in 2015 due to dinar depreciation, we are now forecasting the consumer electronics market to return to positive growth in 2016 and to continue to track positively over the course of our forecast period to 2019. The mobile handset market will become more lucrative as the computers market begins to slow down. Nevertheless, rising incomes and growing spending power across Serbian households will fare better for the consumer electronics market as a whole.

Latest Updates And Industry Developments:

  • Computer Hardware Sales: USD247mn in 2016, posting an annual contraction of 1.9%. This market will return to growth in 2017 as it was hit hard due to dinar depreciation in 2014 and 2015.

  • AV Sales: USD146mn in...

Serbia Defence & Security

BMI View:

BMI View: Serbian defence spending will remain modest in 2016, amid the government's ongoing fiscal consolidation programme. Despite the armed forces' requirements to replace much of its ageing equipment - particularly in the aerospace segment - new procurement will therefore be limited. However, military expenditure will increase gradually in coming years as economic conditions improve, reflecting persistent security risks stemming from unresolved disputes with neighbouring countries, separatists and ultra-nationalist groups - as well as Belgrade's aim to strengthen Serbia's contribution to international peacekeeping missions. Serbian defence manufacturers, most of which specialise in the ground segment, will, due to the lack of domestic demand for their products, remain export-focused. Although we...

Serbia Food & Drink

BMI View:

BMI View: Serbia's economic outlook for 2016-2017 is relatively bleak. Planned austerity measures, high unemployment and tight credit markets will all weigh down economic growth, which we forecast to come in at 1.0% for 2016 and 2.5% for 2017. Net exports will remain a driver of growth, however, export growth will be constrained due to the eurozone's tepid growth and Russia's extended recession. We forecast household spending to grow by 4.5% and total food consumption to grow by 1.6% in 2016.


Serbia Freight Transport

BMI View:

BMI View: BMI believes the outlook for Serbia's freight sector is relatively rosy over both 2016 and our medium-term forecast period to 2019. Average annual growth rates to 2019 for road and air freight will surpass 2016 figures, whereas for rail it will remain around the same. While not bullish in our forecasts, we see improving export growth, huge investments in rail infrastructure - the country's dominant freight mode - and macroeconomic growth that will boost Serbian consumers as providing a stable foundation for growth that will pay dividends to 2019 and beyond.

Trade growth in 2016 will continue to rise and improve upon 2015 growth rates, although we note that 2016 will represent a peak in the medium term and growth will dip from 9.0% growth this coming year to an annual average of 6%. Increased export growth will be a key driver of growth in the short-term, while backbone...

Serbia Information Technology

BMI View:

BMI View: After being a regional underperformer for much of 2012-2015, we believe Serbia's IT market is poised to enter a period of faster growth over the medium term, but particularly from 2017. Central to this view is our Country Risk team for Serbia's positive economic outlook including household income growth, increasing purchasing power in global markets and strengthening business sentiment - all of which should deepen the market, as well as alleviate some price sensitivity. We believe the retail market will fare relatively well in a European perspective 2016-2019, but nonetheless be outperformed by software and services demand that will be underpinned by enterprise and public sector modernisation and service launches. There is particularly strong growth potential for cloud computing services, although we...

Serbia Insurance

BMI View:

BMI View: Serbia's insurance market is one of the smaller markets in the region, with limited rates of penetration and density, particularly in the nascent life sector. Development of the insurance market has been hampered in the past by a weak domestic economy. However, we do expect to see an improvement in economic growth over the medium term, supporting our forecasts for steady growth in life and non-life insurance premiums written by the end of our forecast period in 2019, though currency fluctuations will result in a short-term contraction in US dollar terms.

Headline Insurance Forecasts (Serbia 2012-2019)

Serbia Medical Devices

BMI View:

BMI Industry View: We expect the Serbian medical device market to fall by a CAGR of 0.6% over the 2014-2019 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...

Serbia Pharmaceuticals & Healthcare

BMI View:

BMI View: Serbia will remain an unattractive market for multinational drugmakers in comparison to its regional neighbours. Government cost-containment, via severe drug price cuts, and continued economic issues will dampen the country's growth outlook.

Headline Expenditure Projections

Pharmaceuticals: RSD91.42bn (USD840mn) in 2015 to RSD88.08bn (USD766mn) in 2016; -3.7% in local currency terms and -8.8% in US dollar terms. Forecast unchanged from Q316.

Healthcare: RSD405.24bn (USD3.73bn) in 2015 to RSD414.284bn (USD3.60bn) in 2016; 2.2% in local currency terms and -3.3% in US dollar terms. Forecast...

Serbia Retail

BMI View:

BMI View: Global economic fluctuations, changing consumer demographics and poor governance foster a poor retail outlook for Serbia where high unemployment persists and suppressed household incomes continue to lag behind regional averages in the CEE. Past 2016, however, household incomes, employment and GDP growth will recover and the potential for retail expansion will improve, with communications and tourism offering the greatest prospects.

The Serbian economy, which depends heavily on the trade with the EU and Russia, has been suffering since the onset of the financial crisis. The country's output struggled to make any significant gains and unemployment skyrocketed. Many households make conservative decisions in the retail market as a consequence of a 19.5% unemployment rate, which makes almost a fifth of the country's labour force dependent on social welfare. Economic...

Serbia Telecommunications

BMI View:

BMI View: Market saturation, aggressive price competition and a small number of players continue to hamper the development of Serbia's telecommunications market. The move to 4G began in 2015 and, given the rapid uptake of 3G, we believe operators will quickly migrate customers to the new platforms. However, despite a relatively high incidence of postpaid customers, spending on value-added services will be limited. Further market liberalisation will not encourage new players into the market; rather, we believe Serbia Broadband (SBB) could become the focal point for consolidation and innovation.

Organic Growth Elusive, Focus Now On Upselling
Serbia Mobile Market Forecasts

Serbia Water

BMI View:

BMI View: 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, we expect substantial improvements in the water supply sector over the longer term as a result of the government decision to include water sector improvement in their national defence strategy.

The Serbian water sector is extremely complicated with a number of government bodies in charge of different aspects of the sector, leading to confusion and inefficiency. Moreover, poorly enforced legislation and obsolete, or broken equipment, under-investment and a lack of wastewater treatment plants and rural sewage connections has inhibited the...

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