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Kari Liuhto
University of Turku
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6) Summary 27
7) Additional information 28
© Kari Liuhto, Professor, Turku School of Economics, Finland
Turku, 7.5.2020, Email address: Kari.Liuhto@utu.fi
1) Background
“In February 2008, after nearly two years of inconclusive negotiations, Kosovo declared itself independent of Serbia -
an action Serbia refuses to recognize. At Serbia's request, the UN General Assembly (UNGA) in October 2008 sought
an advisory opinion from the International Court of Justice (ICJ) on whether Kosovo's unilateral declaration of
independence was in accordance with international law. In a ruling considered unfavorable to Serbia, the ICJ issued
an advisory opinion in July 2010 stating that international law did not prohibit declarations of independence. In
late 2010, Serbia agreed to an EU-drafted UNGA Resolution acknowledging the ICJ's decision and calling for a new
round of talks between Serbia and Kosovo, this time on practical issues rather than Kosovo's status. Serbia and
Sources:
Kosovo signed the first agreement of principles governing the normalization of relations between CIA; Nations
the two countries in April 2013 and are in the process of implementing its provisions.” Online Project
1a) Population
8,0
Hungarians
7,0 4%
6,0
5,0
4,0
3,0
2,0
Serbs
1,0 83 %
0,0
2031
2032
2037
2030
2033
2038
2039
2034
2035
2036
2009
2021
2027
2022
2023
2020
2028
2024
2025
2026
2029
2050
2011
2012
2013
2016
2014
2015
2017
2010
2018
2019
2041
2044
2045
2047
2040
2042
2043
2048
2049
2046
Statistical Office of Serbia indicates that the Serbian population was less than 7 million at the end of 2018,
whereas the UNCTAD estimates the Serbian population to be almost 2 million larger. Serbia is a multi- Sources:
ethnic state. The Serbs account for more than 80% of the population. The Roma population is probably UNCTAD;
Statistical
underestimated in the statistics and may represent 5-11% of Serbia’s population. Around 3,000 ethnic Office of
Russians lived in Serbia in 2011. Approximately 85% of the population belongs to the Orthodox church. Serbia; CIA
1b) Economic development
Annual real GDP change (%) 2017 GDP at GDP per
12,0 purchasing capita,
power parity, PPP ($)
PPP ($ billion)
10,0
Serbia 106 15,100
8,0
Croatia 102 24,700
Albania 36 12,500
2,0
North Macedonia 31 14,900
0,0
Kosovo 20 10,900
Serbia’s GDP development is mountainous, as fast growth and deep decline alternate. Economic
wellbeing of a common Serb is less than 40% of that of an average EU citizen. Slovenia and Croatia
perform much better economically than their peers in the region, indicating an indisputable positive Sources:
impact of the EU membership on the economic wellbeing of new members. IMF; CIA
1c) Energy consumption
Oil products
Electricity 35 %
26 %
Coal
Biofuels and 7%
waste
11 % Natural gas
13 %
Oil products, electricity and natural gas meet ¾ of Serbia’s energy demand. In 2018, Serbia imported a
half of its crude oil and all of its natural gas from Russia. Serbia consumed around 2.2 billion cubic meters
Sources: IEA;
(bcm) of natural gas. In comparison, Finland with 5 million citizens consumed 2.6 bcm. Serbia generates Eurostat;
¾ of its electrical energy with coal. The remaining quarter of electricity is produced with hydropower. Gazprom
1d) Business environment of selected countries in 2020
(190 countries ranked)
Global Starting a Dealing with Getting Registering Getting Protecting Paying Trading Enforcing Resolving
rank business construction electricity property credit minority taxes across contracts insolvency
permits investors borders
New Zealand 1 1 7 48 2 1 3 9 63 23 36
North Macedonia 17 78 15 68 48 25 12 37 32 47 30
Serbia 44 73 9 94 58 67 37 85 23 65 41
Somalia 190 188 186 187 153 186 190 190 166 116 168
The Serbian Government has managed to turn Serbia into an internationally-competitive business
environment. As a sign of such an impressive progress, the World Bank ranks the Serbian business
environment better in ease of doing business than the following 11 EU member states: Slovakia, Source:
Belgium, Croatia, Hungary, Cyprus, Romania, Italy, Bulgaria, Luxembourg, Greece, and Malta. World Bank
1d) Corruption perception in selected countries
Corruption perception in 2019 Serbia’s position in global corruption ranking
(180 countries ranked) (higher the rank, higher the corruption)
180
Somalia 180
160
North Macedonia 106
140
Albania 106
120
Kosovo 101
100 91
Bosnia and Herzegovina 101
83
80 71
Serbia 91
Montenegro 60
66
Croatia 63 40
Slovenia 35 20
Denmark 1 0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Source:
It seems that the corruption situation in Serbia has deteriorated since 2016. Despite the worsened Transparency
situation, the corruption is not particularly worrying, when compared to Serbia’s peers in the Balkans. International
2) Foreign trade
2a) The development of Serbia’s foreign trade
Serbia’s foreign trade with goods ($ billion) 2019 Exports Imports
30,0 ($ billion) ($ billion)
26,7
25,0
Serbia’s exports have doubled and its imports have grown by nearly 70% between 2009 and 2019. Despite the
visible growth, one needs to notice that Slovenia with some 2 million people exports and imports much more
than Serbia with some 7 million people. Moreover, Croatia’s foreign trade is larger than that of Serbia despite
the fact that Croatia’s population size is significantly smaller. The aforementioned facts are indisputable Source:
evidence on the positive impact of the EU membership. Slovenia joined the EU in 2004 and Croatia in 2013. WTO
2b) 10 main foreign trade partners in 2019
Serbia’s exports Export share (%) Serbia’s imports Import share (%)
Germany 13 Germany 13
Italy 10 Russia 10
Romania 6 Italy 9
Russia 5 Hungary 4
Montenegro 4 Turkey 4
Hungary 4 Poland 3
Czechia 3 France 3
Slovenia 3 Austria 3
Germany with a 13% share was Serbia’s largest trade partner in 2019. Russia with 10% was Serbia’s 2 nd
largest import country. Here one needs to remember that in 2009 Russia covered 12% of Serbia’s
imports, and thus Russia was Serbia’s largest import partner then. In turn, China’s share has grown Sources: Statistical
from 7% in 2009 to 9% in 2019. In 2019, the EU27 accounted for over 60% of Serbia’s foreign trade. Office of Serbia; EU
2c) The export structure in 2009 and 2019
Food and live Food and live
Others Others
animals animals
2% 2% Beverages and
18 % Miscellaneous 13 %
Miscellaneous Beverages and tobacco
13 %
16 % tobacco 3%
3%
Crude materials,
inedible, except fuels
3%
Manufactured Manufactured
goods Chemicals
Chemicals goods
26 % 9%
8% 24 %
The extent of value added has increased in Serbia’s exports between 2009 and 2019, indicating
improved competitiveness of the Serbian export industries. In 2019, Serbia’s 5 main export items
were: (1) ignition wiring sets for automobiles, airplanes and ships (6%); (2) tyres (3%); Source:
(3) maize (3%); (4) iron and steel (3%); and (5) refined copper (2%). Statistical Office of Serbia
2c) The import structure in 2009 and 2019
Beverages and Beverages and
Others Food and live animals Others Food and live animals tobacco
tobacco
19 % 4% 11 % 6% 1%
1%
Crude material,
Crude material,
inedible,
inedible,
except fuels
except fuels
Miscellaneous 3% Miscellaneous 5%
8% 7%
Animal and
Animal and
vegetable oils
vegetable oils
2009 3%
2019 0%
Chemicals Chemicals
12 % 14 %
Machinery and Machinery and
transport transport
equipment equipment
19 % Manufactured 26 % Manufactured
goods goods
16 % 19 %
Serbia’s imports have grown fast between 2009 and 2019, but despite the growth, the share of machinery
and transport equipment has increased by 7 percentage points, indicating significant investments in industrial
reform, as just a minor part of machinery-related imports was related to consumption, i.e. cars and cellular Source:
Statistical
phones. Serbia’s 3 most valuable import items in 2019 were: (1) petroleum products (4%); (2) pharmaceuticals Office of
(3%); and (3) natural gas (2%). By investing more in renewable production, Serbia could reduce its import bill. Serbia
3) Foreign direct investment
3a) Development of foreign direct investment (FDI)
Inward and outward FDI stocks of Serbia Annual FDI inflow and annual FDI outflow
($ million) ($ million)
50000 10000
44109
45000 9000
40000 8000
20000 4000
10000 2000
3300 4198
5000 2360 1000 416
1968
0 0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Inward FDI stock Outward FDI stock Annual FDI inflow Annual FDI outflow
Serbia has been rather successful in attracting foreign direct investment during the past few years. By the
end of 2018, Serbia has managed to attract over $ 40 billion as FDI. Moreover, low FDI outflow figures Source:
suggest that no major capital round-tripping exists to/from Serbia. UNCTAD
3b) Geographic division
Others USA
33 % 11 %
France
10 %
Czechia Austria
7% 10 %
China Germany
9% 9%
The statistics provided by the Serbian authorities do not allow one to show how the inward FDI
stock is divided among countries or industries. However, the data offered by the Development Sources: Development
Agency of Serbia; Central
Agency of Serbia (DAS) may give a certain clue. The DAS suggests that the Italian investments Bank of Serbia; Statistical
dominate the Serbian FDI landscape. It is surprising to see a large FDI share of Czechia. Office of Serbia
3c) Sectoral division
Agriculture, food
and beverage
11 %
Others
42 %
Textile and
clothing
9%
The automotive industry seems to be the dominant target for foreign investors in Serbia. Source: Development
Obviously, the banking and insurance sector has not been included in the above analysis. Agency of Serbia
4) Foreign tourism
4a) Foreign visitors in Serbia
Foreign visitors in the Serbian hotels (million) 2009 2019
2
China, including Hong Kong 0% 8%
1,8 Bosnia and Herzegovina 10% 7%
1,6 Turkey 2% 6%
1,4 Germany 6% 6%
Croatia 6% 6%
1,2
Bulgaria 4% 5%
1
Montenegro 10% 5%
0,8
Slovenia 9% 5%
0,6
Romania 4% 4%
0,4 Greece 4% 4%
The number of foreign visitors in the Serbian hotels has grown rapidly, but the foreign tourism income in
Serbia is still insignificant compared to its peers on the shore of the Mediterranean sea. As an example,
foreign tourism income formed just 8% of the Serbian export revenues in 2018. The respective figure in
Serbia’s southern neighbour Montenegro was over 50%. The Chinese have found Serbia. They
Source: Statistical
represented 8% of all foreign visitors in the Serbian hotels in 2019. On the other hand, Office of Serbia;
the citizens of the European Union formed a half of all foreign hotel visitors in 2019. World Bank
4b) Foreign hotel visitors in the Serbian regions
Sumadija and
Western Serbia
17 %
Belgrade
57 %
Vojvodina
15 %
Source:
Unsurprisingly, foreign tourism concentrates in the capital and the surrounding region. Statistical
Nearly 60% of the foreign visitors stayed in the hotels of Belgrade and its region in 2019. Office of Serbia
5) Economic relations between Serbia and Russia
Serbia and Russia are historically close allies. An interview of Russia’s Foreign Minister Lavrov in December 2019 confirms that the historic
connection still exits. Minister Lavrov said that “I can say honestly that when visiting Belgrade, both my colleagues and I, always feel at home
there. And there is nothing surprising about this because our two really fraternal nations are united by common cultural and civilisational roots,
spiritual ties and the warmest friendship and affinity.” (an interview conducted by Srpski Telegraf, Ministry of Foreign Affairs of Russia).
5a) Trade between Serbia and Russia
4500
Serbia’s trade with Russia, in particular the Serbian exports to Russia, has grown notably
between 2009 and 2019. As the Serbian imports from Russia consists mainly of fuels,
Serbia’s imports from Russia will most probably crash in 2020 due to an oil price dip. Even
Sources: Statistical authorities of
if Serbia is regarded Russia’s closest ally in South-East Europe, it is good to notice that Bulgaria, Cyprus, Romania and
Bulgaria is much more dependent on its trade with Russia than Serbia. Serbia; EU; World Bank
5a) Trade structure between Serbia and Russia
Serbia’s exports to Russia Export Export Serbia’s imports from Russia Import Import
share share share share
2009 2019 2009 2019
Food and live animals 16% 29% Food and live animals 1% 1%
Crude materials, inedible, except fuels 1% 5% Crude materials, inedible, except fuels 1% 3%
Machinery and transport equipment 17% 13% Machinery and transport equipment 2% 9%
Others 0% 0% Others 3% 2%
Food has become Serbia’s main export item to Russia. Serbia’s food exports skyrocketed immediately
after Russia banned food deliveries from the West in the fall of 2014. In 2019, the fuels accounted for
more than a half of Serbia’s imports from Russia, meaning that the share of fuels in Serbia’s imports
from Russia has dropped more than 20 percentage points in dollar terms. However in terms of tonnes,
Source:
Serbia’s fuel imports have practically remained unchanged between 2009 and 2019, i.e. structural change Statistical
from fuels towards manufactured goods (mainly iron, steel and metals) and machinery has taken place. Office of Serbia
5b) Russian direct investment in Serbia
30000
25000
20000
15000
10000
The Serbian statistics do not allow one to analyse the presence of the Russian investors in Serbia.
Therefore, the figure above presents data from 2 different sources. Although the method does not
meet the puritan scientific criteria, it gives an idea of the Russian capital presence in Serbia, Sources: UNCTAD;
which seems to be much more modest than could be anticipated, i.e. less than 4% in 2018. Central Bank of Russia
5b) Serbian direct investment in Russia
Serbia’s total direct investment in Russia Share of Serbia in Russia’s inward FDI stock
($ million) (%)
200 0,10
140 0,07
120 0,06
100 0,05
0,04
80 0,04
60 0,03
40 0,02
20 0,01
0 0,00
2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018
The Serbian companies have invested approximately $ 150 million in Russia by the end of 2018, and Source: Central
with these investments they account for a tiny 0.04% of Russia’s accumulated inward FDI stock. Bank of Russia
5c) Russian hotel visitors in Serbia
Russian hotel visitors in Serbia Share of the Russians among the foreign hotel
visitors in Serbia
100000 5,0 4,9
90000 4,5
80000 4,0
3,5
70000 64103 3,5
2,6
60000 3,0
50000 2,5
40000 2,0
30000 1,5
10000 0,5
0 0,0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
The Russians are not particularly active in travelling to Serbia. In fact, the Russian tourists prefer
Montenegro over Serbia. Nearly 400,000 Russians travelled to Montenegro in 2019. Moreover, Source: Statistical
the Russian tourists are not as a significant source of income to Serbia as the Chinese tourists. Office of Serbia
5c) Serbian visitors in Russia
Number of the Serbian visitors in Russia Share of the Serbians among all foreign
visitors in Russia (%)
100000 1,00
90000 0,90
80000 0,80
70000 0,70
60000 0,60
52000
50000 0,50
40000 0,40
30000 0,30
0,21
20000 0,20
10000 0,10
0 0,00
2016 2017 2018 2019 2016 2017 2018 2019
In 2019, a bit over 50,000 Serbians travelled to Russia, and the number has remained at that level Source: Federal Agency for
during the past few years. The Serbian visitor in Russia is a rare acquaintance. Tourism of Russia
6) Summary
Serbia is the largest part of former Yugoslavia with the population of 7 million. A substantial Roma
community live unregistered in Serbia. As a whole, it may represent 5-11% of the total population.
Serbia’s economy has experienced several ups and downs since Kosovo separated from it in 2008.
The Serbian GDP grew by 1.9% annually last decade, which was only a half of the growth rate of its
breakaway region Kosovo.
Serbia’s foreign trade has grown fast, but it is still smaller than foreign trade of smaller parts of ex-
Yugoslavia, namely Slovenia and Croatia, which joined the EU in 2004 and 2013, respectively.
The EU27 covered over 60% of the Serbian foreign trade in 2019. Germany was Serbia’s largest
trade partner with a 13% share. Russia accounted for nearly 7% of the Serbian foreign trade.
China has found Serbia as well. China’s share in Serbia’s total foreign trade stood at 6%.
Besides, China has become a major investment and tourism partner for Serbia. One could argue
that China has already become a more important economic partner for Serbia than Russia. Russia’s
alliance with Serbia is based more on non-economic factors, such as historic, religious and military
cooperation, rather than on extensive economic cooperation. If Russian energy supplies would be
excluded, Russia would be a rather modest economic partner for Serbia. In turn, Serbia seems to
be more of a geopolitical instrument in the Balkans than a strategic economic partner for Russia.
7) Additional information