Thriving in Serbia: Business Growth, Economic Strengths, and Key Risks
Throughout 2023, Serbia has established itself as a leading choice for global entrepreneurs looking to boost existing business operations, incorporate new entities, and extend the reach of their businesses. The country’s appeal to business professionals is well-founded, thanks to its advantageous geographical position in Europe (outside the EU), rapid economic growth, and the country’s absence from the forefront of political debates.
Foreign investors in Serbia benefit from customs perks in EU countries, enjoy low business upkeep costs, and have access to the European market. However, be sure to consider the potential risks associated with the current economic and political developments affecting Serbia, among other factors.
Expanding a business in international markets, such as Serbia or Singapore, requires careful navigation of economic opportunities and regulatory frameworks. Ensuring compliance with local laws is crucial to maintain a strong foundation for growth. For businesses operating in Singapore, affordable corporate secretarial services can streamline administrative processes, including statutory filings and governance compliance, allowing companies to focus on strategic objectives while managing risks effectively in a competitive global market.
Business structures in Serbia in 2024: legal forms and requirements
For 2024, Serbia offers a variety of organizational and legal forms for business establishment:
- Individual Entrepreneur (Pr): In this form, the owner bears full liability for the business’s debts. You can complete registration online via the Business Registers Agency’s centralized system.
- Partnerships: These come in two forms:
- General Partnership (DO): Partners share equal rights and duties.
- Limited Partnership (KD): It consists of a general partner, who is fully liable, and a limited partner, whose liability is limited to their investment.
- Limited Liability Company (DOO): These entities are established by one or more persons with a minimum capital of EUR 1. They are suitable for small and medium businesses. Online registration is possible.
- Joint-Stock Company (AD): Appropriate for larger enterprises, joint-stock companies come with a board of directors, shareholders, a company secretary, an auditor, and a supervisory committee. The minimum share capital is RSD 3,000,000 (EUR 25,587), with 25% required at formation. ADs can be either public or private.
- Branch or Representative Office: These are meant for foreign companies to set up a local subsidiary or office.
Each structure is designed to cater to different business sizes and needs, which offers flexibility for entrepreneurs and investors in Serbia.
Risk factors for Serbian businesses: survey findings
At Serbia Wealth, we believe that there’s no need to explore the universally recognized risks for entrepreneurs, as these are commonly understood in business circles. Instead, we’ll direct our attention toward the particular risks you may encounter in Serbia, as identified by the business community through recent surveys.
Expenses
The survey revealed that in 2023, almost 90% of respondents considered expense-related risks, with labor, logistics, travel, raw materials, and energy costs among them, as a significant threat to businesses, more so than in the previous year. Serbian entrepreneurs attributed this heightened risk to the steep inflation rate of 15.1% in 2022, which led to increased consumer prices and business expenses.
EU relations
For 47% of entrepreneurs, the strained relations with the European Union pose a risk. This issue has political roots, including the Kosovo situation and Serbia’s refusal to sanction Russia, which may affect Serbia’s EU accession prospects and investment flows.
Workforce shortage
A lack of skilled workers is a concern for 53% of survey participants. The Serbian government’s initiative to ease the employment process for foreign migrants is expected to address this issue.
Note: Serbia’s migrant-friendly policies allow visa-free entry, simplified residence permits with no investment thresholds, and eventually obtaining citizenship in this Balkan nation.
Other risks
Entrepreneurs in Serbia, both domestic and international, may encounter several pitfalls:
- reduced consumer purchasing power
- debt recovery issues
- rising interest rates
- shrinking demand in the consumer market and lower private investments
These risks are largely linked to the prevailing uncertainty among Serbian business people.
Note: The Serbian business elite’s expectations are varied, with a general consensus leaning towards the improvement of all business-related indicators.
Serbia’s economic performance in 2023
In 2023, Serbia’s economic indicators, as per international corporate research, were characterized by the following:
- The nation saw a GDP growth rate of 2.3%. Inflation maintained an average annual rate of 9.5%, with a high of 12.2%. The GDP budget balance decreased by 2.7%, and the government debt was reduced to 55.5%.
The analysis of the country’s economic situation also highlighted several strengths:
- A trade agreement with the EU facilitated the duty-free import of 93% of goods.
- Collaboration with the IMF led to significant public sector reforms.
- Serbia’s rich natural resources, including important minerals and metals, were a key economic asset.
- The country boasted a strong agricultural sector, with substantial production of grains, vegetables, and fruits.
- The automotive industry showed signs of expansion, indicating a growing manufacturing base.
Economic challenges you may encounter in Serbia
Serbia’s economic landscape is marked by several negative aspects and risks that you should be aware of in order to succeed.
The tension in Kosovo and Serbia’s reluctance to join Western sanctions against Russia have strained relations with Western economies, which negatively impacted Serbia’s economic performance. Lengthy judicial processes, customs harassment, and widespread corruption were the issues that further impeded economic progress.
In 2021, the informal economy accounted for a considerable portion of Serbia’s GDP, amounting to 20%. As of Q3, 2022, it made 14% of all employment. The substantial informal sector poses risks to the economy’s stability and growth.
While these points outline general risks to Serbia’s business and economic environment, we dare state that compared to other countries, including those in Europe, Serbia’s situation may not be as dire, and some jurisdictions are facing even more challenging economic indicators at present.
Even amidst a global crisis and tense EU relations in 2024, Serbia retains its appeal to foreign investors. It is one of the select European nations that uphold neutrality and maintain amicable business relations across most EU and Asian territories.
Considering the Balkans? Get expert advice on business and residency
For those considering the Balkans as their base for business expansion or permanent residency, Serbia Wealth experts are ready to offer valuable recommendations on any relevant topics. You are also welcome to explore various services offered by our partners and consultants in Serbia. To do it, visit this page.
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