In April this year, when the world was hit by the corona-induced crisis, foreign direct investments in Serbia fell by more than 30%, said the chief economist of the Fiscal Council, Danko Brcerevic.
The net foreign direct investments in Serbia amounted to 240 million euro, while in the same month of 2019, they stood at 355 million euro.
“This downward trend in foreign direct investments will continue and that is why it is necessary to create the conditions for the growth of domestic private investments,” said Brčerević.
He added that, in this way, the disturbances in economic growth will be reduced during major crises when foreign direct investments tend to decline.
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“Total foreign and domestic investments in Serbia, even before the crisis, were not sufficient to achieve higher economic growth and only in the last two years, they exceeded 20% of gross domestic product (GDP), while in Central and Eastern European countries they reached even 25% of GDP,” said Brcerevic.
Moreover, in Serbia, according to him, there is a great asymmetry between domestic and foreign investments.
In the countries of Central and Eastern Europe, it is common for foreign investments to account for 5% to 6% of GDP, while in Serbia, in the last three years, they accounted for more than 7% of GDP, which means that domestic investments from the private sector have been extremely low.
According to Brcerevic, the reason for the low investments of the domestic private sector is the unfavourable economic environment, especially pronounced corruption and insufficient rule of law, which is why local entrepreneurs refrain from investing.
“Foreign direct investments in Serbia are above average because these companies are oriented not towards domestic markets but towards foreign markets because they have state agencies that help them deal with domestic bureaucracy and often use tax breaks and state subsidies for job creation,” said Brcerevic.
As a result of the ongoing crisis, it is almost certain that foreign direct investments will not be enough to help economic growth for some time. It would be good for the state to increase its investments in infrastructure to compensate for this deficit in 2021.
A crisis like the current one, he said, shows how important a stimulating environment for domestic private investment is – namely, that there is a rule of law and an efficient judiciary, the fight against corruption, the construction of infrastructure and other prerequisites that are essential for Serbia not to depend so much on changing conditions and shocks in the international market.
This post is also available in: Italiano