Country risk reference rating: Level 6 (6/9)
Country Risk Outlook: Positive
Economic and trade risks
In 2012, Serbia’s nominal GDP was US$38.36 billion, per capita GDP was US$5,400, the real economic growth rate was -1.7%, and the inflation rate reached 7.3%. Serbia’s economy is highly dependent on Europe. Currently, due to the impact of the European debt crisis, Serbia’s domestic economy is experiencing a slight recession. The inflation level is higher than the government’s target. The unemployment rate remains high. The economy’s dependence on foreign investment and its own ability to earn foreign exchange have declined. The lack of assistance has kept Serbia’s external risks at a high level for a long time, and it is difficult to fundamentally change the situation of relying on IMF bailouts.
Entering 2012, Serbia’s economic prospects are not optimistic. Economic growth is greatly affected by the economic downturn in European countries. At the same time, Serbia also needs to implement tightening fiscal policies to meet the requirements of the International Monetary Fund. Considering that the European sovereign debt crisis cannot be resolved in a short period of time, Serbia’s macroeconomic growth may still fluctuate.
Investment risk
In recent years, the Serbian government has actively implemented economic reforms, promoted privatization, and improved the internal investment environment. The business and investment environment has improved to a certain extent. In the “Business Environment Report 2013” released by the World Bank, Serbia ranked 185th The comprehensive ranking of business index among individual economies rose 9 places to 86th. Serbia has established a private executive system. If any disputes arise during the performance of a contract or the process of bankruptcy liquidation, the winning party can choose to enforce the judgment through a private executive or court bailiff, which greatly improves enforcement efficiency. In addition, Serbia has also abolished minimum paid-in capital requirements to facilitate the registration of new companies; established an online registration system to publish all bankruptcy orders issued by the court and prohibition orders on related assets, improving the transparency of the bankruptcy liquidation process.
At present, Serbia has officially become a candidate member of the European Union, and domestic laws and regulations in various fields such as trade and investment will gradually converge with relevant EU laws and regulations. After the new Serbian government was formally established, it continued to promote the EU accession process and continuously improved the legal construction. At the same time, it adopted a series of measures that were conducive to improving the market environment.
Legal risks
The Serbian legal system is based on the civil law system. In order to attract investment and promote economic development, Serbia has accelerated the construction of the legal system and is committed to improving the legal system. At present, Serbia has established a stable legal system, but the legal system is still opaque, corruption occurs frequently, and the government seems unable to deal with it. Serbia’s efforts to improve business legislation have often been hampered by political battles over unrelated issues. The biggest challenge in the Serbian legal system is the inefficiency of law enforcement. In this regard, Serbia still needs to increase its efforts.
In terms of investment, Serbia’s preferential policies for attracting foreign investment mainly take care of enterprises that increase employment. Due to the current fiscal austerity of the Serbian government and financial constraints, care should be taken not to have too high expectations for local policies regarding bonuses to reward foreign investment. The country has a large proportion of social welfare taxes, and the procedures for foreign investment tax credits are relatively complicated. Serbian labor laws are relatively strict, and the employment system and labor security requirements are relatively high. The current employment situation in Serbia is severe and there are strict restrictions on foreign labor.
Overall risk
Generally speaking, Serbia’s current political structure is facing challenges from many unstable factors, and the political situation is relatively severe. After experiencing war and international sanctions, Serbia has gradually returned to the international community, relations with neighboring countries have been repaired, and the country’s democracy and rule of law have been greatly improved. However, domestic political integration is still in its early stages.
Serbia’s economic situation has improved, and the national economy has shown a steady and rising trend. However, there are also many contradictions and problems in the development process. Serbia is still facing problems such as the continued increase in government fiscal deficit and debt, high unemployment rate and inflation rate, which restricts the overall recovery of the economy. In addition, foreign direct investment in Serbia is still insufficient, while domestic demand has a relatively limited role in stimulating the economy. Serbia’s legal system is still imperfect, and a comprehensive judicial guarantee system has not yet been established in the country.
Based on the analysis and assessment of the current overall situation, Serbia’s national risk reference rating is 6 (6/9), with a high national risk level and a positive national risk outlook.
