The Impact of FDI on the Transitional Economy in Serbia - Changes and Challenges

Abstract

Our study analyzes the transition period of Serbia from a centrally planned to a market economy with a special view to the political, social and economic conditions during the 1990s, and the economic circumstances after the 'democratic revolution' through the inflow of FDI, GDP, GDP per capita, GDP growth rate, exports, imports, trade balance, and unemployment rate. The economic decline in the 1990s was a consequence of war, international sanctions and mismanagement of economic policy. Serbia witnessed one of the greatest hyperinflations in modern history. With the purpose of creating the conditions for an inflow of FDI, economic reforms started in 2000 in Serbia. Since the 'democratic revolution', most FDI has entered the sector of non-exchangeable goods. That has had negative effects on Serbia from the development viewpoint, since the country needs FDI to the sector of exchangeable goods, as they encourage productivity and technological progress. Foreign investors to Serbia were primarily interested in profiting from the privatization of former state-owned companies. The benefits that Serbia has had from the inflow of FDI since 2000 relate to significant transfer of technology, enhancement of competition on the local market, the training of employees, etc.