At first glance, the data on foreign direct investment (FDI) in Serbia appears encouraging – the net inflow in the first five months of this year amounted to €596 million, higher than the €438.9 million recorded in the same period last year. However, a closer look at the structure of these investments reveals a completely different picture.

According to data from the National Bank of Serbia, almost the entirety of the inflow is the result of reinvested earnings – profits that foreign companies made in Serbia and decided to reinvest back into their operations. At the same time, net inflows of new equity capital are practically non-existent, coming in at minus €10 million, while reinvested earnings reached €1.273 billion.

The gap between this figure and the total net inflow of €596 million was narrowed by intercompany loans, which were negative to the tune of €667 million.

What does this data say about the state of the domestic economy and the investment climate? Professor Ljubodrag Savić from the Faculty of Economics and Bojan Stanić, Assistant Director of the Sector for Strategic Analyses, Services and Internationalisation at the Serbian Chamber of Commerce, shared their insights with Insajder.

Professor Savić: Reinvestment is a good signal

Ljubodrag Savić, a professor at the Faculty of Economics, believes that the fact foreign companies are reinvesting their profits in Serbia is a positive rather than a negative signal.

“If they had wanted to, they could have taken those profits out of the country. That would be an indicator that they are not seriously considering staying in Serbia. However, when someone starts a business and doesn’t spend all the profits made, but reinvests a portion, I see that as a good signal. I don’t think it’s bad at all – on the contrary. It would be bad if they took the profit they made out of the country,” says Savić.

He explains that reinvested earnings demonstrate that companies plan to continue operating in Serbia.

“If they weren’t planning on staying in Serbia for the long haul, they would keep their existing capacities and extract money for as long as possible. When you reinvest profit, it means you plan to stay longer. It’s confirmation that the business is working well and that the company is turning a profit. The fact that this money was neither extracted from Serbia nor directed to the parent country or somewhere else, but reinvested in expanding production in Serbia, shows that the company is relying on continued business here,” Savić notes.

Savić believes that Serbia still holds certain advantages over other countries in the region when it comes to attracting foreign investment.

“Serbia perhaps has the best conditions among countries in this part of Europe. It has many advantages because, unlike some other countries that have opted exclusively for the European Union, Russia, or China, it finds itself in a fairly good position. It cooperates with both China and the European Union, we have Russian investments – namely the issue of NIS which is yet to be resolved – as well as cooperation with other countries,” he says.

Savić assesses that the near-total absence of new equity capital is primarily a consequence of global uncertainty, rather than a deterioration in Serbia’s investment standing.

“This is primarily a consequence of geopolitical circumstances. Today, it is very difficult to predict what the situation will look like in a year or two, which makes the environment for new investments highly unfavorable. Investors look for certainty, and right now, there isn’t any,” says Savić.

As an example, he points to companies that depend heavily on energy resources.

“If you take, for instance, the Smederevo Steel Mill, which uses large amounts of gas, the question isn’t just what the price of gas will be, but whether there will be any at all. The European Union could make various decisions that might affect Serbia’s supply. That is just one example,” he explains.

According to him, additional uncertainty is created by wars and geopolitical tensions, which impact energy and transport costs.

“There’s the war in Ukraine, conflicts in the Middle East, the potential closure of key maritime routes like the Strait of Hormuz or the Suez Canal, all of which could trigger a surge in oil prices and transport costs. Oil prices change from day to day. All of this sends a message to investors that now is not the time for new investments,” Savić concludes.

He adds that under these circumstances, investors must also factor in the risk of changing trade terms.

Stanić (CCIS): Serbia isn’t the problem, it’s the investor source countries

Bojan Stanić from the Serbian Chamber of Commerce (CCIS) points out that despite the economic slowdown in Germany – Serbia’s most important external trade partner – exports from Serbia to that market have continued to grow in recent years.

“When you look at Serbia’s exports over the past few years, during which a significant part of the European Union (primarily Germany) has been in stagnation, you’ll see that exports from Serbia to that country have been continuously growing. Germany has effectively been in stagnation for five or six years, yet our exports are rising,” says Stanić.

As he explains, one reason for this is that companies operating in Serbia have become reliable suppliers to the German economy.

“Companies founded with German capital, as well as others that form part of their supply chains, have proven to be reliable suppliers to German companies – especially in the automotive industry – largely due to a favourable price-to-quality ratio,” Stanić notes.

He adds that representatives of the German business sector have previously stated that, despite the slowdown in the German economy and the political climate in Serbia, they do not plan to leave the local market.

“They said that regardless of the stagnation in the German economy and the political situation in Serbia, they are not pulling out of this market. That is why they continue to renew industrial capacity and production facilities in Serbia, which also involves reinvesting a portion of their profits,” says Stanić.

Stanić points out that the same pattern can be observed with investors from other countries as well.

“This doesn’t apply only to German companies. Italian, French, and other foreign firms also continue to leverage the advantages of doing business in Serbia to stay competitive in the European, as well as international, market. Goods coming from Serbia are competitively priced, and their quality does not fall behind,” Stanić says.

In his view, the reason for the weaker inflow of new foreign capital should not be sought in changes within the Serbian economy, but rather in the circumstances of the countries where the investments originate.

“When talking about FDI, the problem isn’t that the internal structure of the Serbian economy has changed. The problem lies at the source and is connected to economic stagnation. Companies today have less money for new investments and must allocate more funds toward maintaining existing capacity so they don’t have to close factories,” Stanić explains.

He also rejects claims that Serbia has exhausted its development model based on attracting foreign investment.

“Talk of us having completely exhausted this model and that there is no longer any point in pushing for foreign investment is nonsense. It is extremely difficult for a single domestic company to compete with multinationals. What is possible is for domestic firms to become part of their supply chains,” Stanić says.

Stanić believes that, given the lower inflow of foreign investment, Serbia needs to pay closer attention to encouraging domestic investment:”The goal was never to rely entirely on foreign investment. In periods when their inflow slows down, it is necessary to strengthen the capacity of domestic business owners to invest – that is, to encourage domestic capital and domestic investments.”

He evaluates that one of the biggest challenges remains the insufficient integration of domestic micro, small, and medium-sized enterprises into the supply chains of large corporations. “When it comes to EU companies, that integration is higher, whereas with Chinese investors, it is significantly lower. That is why we must invest more in developing what the Germans call the Mittelstand – medium-sized enterprises, as well as smaller firms with significant economic potential. They are precisely the ones supplying major corporations while simultaneously supporting a network of smaller suppliers,” Stanić concludes.

(Forbes Serbia, 03.08.2026)

https://insajder.net/vesti/postojeci-reinvestiraju-novih-investitora-nema-sta-nam-otkriva-nedavno-objavljena-struktura-stranih-investicija-u-srbiji