Serbia faces decline in foreign investment as labor costs rise

Slobodan Minić, a member of the Fiscal Council of Serbia, stated that the previous economic model of attracting foreign investment through cheap and abundant labor has been exhausted. He noted that rising average and minimum wages, increased labor costs, and a stronger euro have made Serbia less competitive in labor-intensive sectors, with unit labor costs now nearly equal to those in Central and Eastern Europe.

Since the beginning of 2023, more than ten foreign companies receiving state incentives have closed or announced closures, while at least ten others have reduced production. Notably, the company Drekslmajer has announced its departure from Serbia by the end of next year. Minić also cited international factors, such as the crisis in the European automotive industry, as contributors to these departures.

To address these shifts, Minić emphasized the need to strengthen the domestic private sector by improving the rules of the game, ensuring the rule of law, and increasing institutional efficiency, rather than relying solely on subsidies.