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Opportunities to Grow Tree Nut & Wine Exports in Serbia

Serbia offers good opportunities for the U.S. exporters of consumer-oriented agriculture products. From January-October 2023, total U.S. exports of agriculture products to Serbia reached $22.6 million, an increase of about 16 percent compared to the same period in 2022. The most significant commodities traded were almonds, whiskey, bourbon, tobacco, sweet potato, pistachios, peanuts, vegetable planting seeds, pet food, cranberries, juices and extracts from hops, wine, dietetic foods, concentrated proteins, snacks food, fish, and seafood products. This report provides U.S. food and agriculture exporters with background information and suggestions for entering the Serbian market. The statistical data are as of October 2023.

The World Bank (WB) ranks Serbia as an upper middle-income economy based on the Gross National Income per capita of the previous year (2023). Serbia is ranked 35th among the 39 countries in Europe. Moreover, the International Monetary Fund projected real GDP change at 2 percent in 2023. The total GDP is projected at $75 billion. Serbia is a developing country with a vibrant agriculture and food industry which contribute to almost 10 percent of total GDP. In 2023, the average annual inflation rate is expected to be 8.5 percent. Serbia has Free Trade Agreements with the European Union (EU), Turkey, and the Eurasian Economic Union (Russia, Kazakhstan, Belarus, Armenia, and Kyrgyzstan). It is also a signatory to the Central European Free Trade Agreement (CEFTA). January-October 2023 Serbia’s total agri-food exports reached a value of $4.1 billion, a decrease of 8 percent from the same period in 2022. The total agriculture imports in 2022 were valued at $2.9 billion, a decrease of 3 percent compared to the same period in 2022 with a registered $1.2 billion surplus.

In the January-October 2023 period, agri-food imports were $2.9 billion, a 3 percent decrease compared to the same period in 2022. Over 60 percent of imports come from the EU member states, while 30 percent come from the CEFTA member countries. The total U.S. agri-food exports to Serbia for the January-October 2023 period were valued at $22.6 million, with an increase of about 16 percent compared to 2022. One major obstacle to increasing the U.S. market share in Serbia a is 30 percent customs import tax on most agri-food products, compared to zero import taxes for products from countries with whom Serbia has signed FTAs (about 90 percent of Serbian trade partners). Essential commodities imported from the U.S. include almonds ($4.9M), whiskey bourbon ($3.5), consumer products ($2.6M), pistachios ($2.5M), tobacco ($1.4M), peanuts ($860,000), baby food ($605,000), vegetable seed ($580,000) and hake ($520,000).

Serbia is the largest agricultural market in the Western Balkans, with strong agricultural production and food processing tradition. Serbia is a global leader in the production of non-GMO corn and raspberries. The food processing industry accounts for approximately one-third of Serbia’s processingindustry. Over 20,000 food businesses are operational, and about 90 percent are micro, small, or medium-sized enterprises. This industry employs more than 120,000 people and is a rare example of a sector that has not been hit adversely by the economic crisis during COVID-19 pandemic. The largest subsectors in Serbia by value are dairy, meat, fruits, vegetables, wine, and confectionery industries.

Food retail revenue in the Serbian market is approximately $9 billion a year, which represents a relatively small market. Foreign retail chains hold more than 80 percent of the total retail market, mainly divided between Dutch-owned Delhaize (owner of retail chains Maxi and Tempo) and the Croatian Fortenova Group (owner of retail chains Idea, Roda, and Mercator). Other international retail chains include Germany’s Metro, Lidl, and Greece’s Super Vero. Domestic retail chains represent only some 20 percent of the Serbian market: Dis, Univerexport, and Gomex. More than 50 percent of all food products are still sold through small grocery shops (estimated to number close to 30,000). Due to significant changes in consumer behavior during the COVID-19 pandemic, online retail increased by almost 600 percent since March 2020. Delivery services also expanded their business in Serbia by more than 400 percent over the past 3 years.

Economic Situation

The Serbian economy is rebounding from last year’s energy price shocks, despite continuing adverse economic conditions both regionally and globally. Economic growth is expected to reach 2 percent in 2023, increasing to 3 percent in 2024 as domestic demand recovers. Unemployment is at an all-time low. Inflation rose to 16 percent in February 2023, which was slightly higher than expected, led by higher food and energy prices. Average inflation in 2023 is expected to be 8.5 percent mostly driven by cost-push pressures. Additional challenges include the performance of the Serbian energy sector and the availability of electricity and gas in the winter of 2024, as well as the rising cost of financing the fiscal deficit and debt obligations considering higher interest rates. With limited space for future stimulus packages, structural reforms are needed to bring the economy back to sustained and growth, boost jobs and incomes. Currently, almost 60 percent of the population’s income is spent on food it is expected to be even more during 2024.

Serbia needs to make further changes to its regulatory policy, mainly in accordance with the 2023 European Commission (E.C.) Annual Progress Report for Serbia published on November 8, 2023, https://neighbourhood-enlargement.ec.europa.eu/serbia-report-2023_en. According to the report Serbia made limited progress overall. The capacity to pursue key challenges in trade policy needs to be strengthened, to move forward with accession to the World Trade Organization (WTO), where again no progress was made. In October 2023, Serbia provided an updated list of actions to be taken in the context of the WTO accession process as part of the action plan on its remaining legislative alignment with the EU acquis. In the coming year, Serbia should adopt a WTO-compliant law on genetically modified organisms, to move forward with remaining bilateral market access negotiations and towards finalization of its accession to the WTO.

Overall Business Climate

Serbia is an open economy with a strategic geographic location that makes it an attractive destination for investment and exports. Serbia has easy access to both EU and non-EU markets, a highly skilled and educated force, and solid infrastructure that has led many global companies to establish manufacturing and service facilities (see Serbia’s Country Commercial Guide https://www.trade.gov/country- commercial-guides/serbia-market-overview?section-nav=5477 ).

Recent Trends

The local and regional media frequently publish articles detailing consumers perceived (and actual) discrepancies in the quality of identically branded food products sold in Western Europe and Serbia. Concerns about ingredients and lower quality also have a strong influence on buyers’ confidence in imported products. This “dual ingredient” issue is common in Central and Eastern European countries. Most consumers have adjusted their eating habits and diet for health reasons, increasing health consciousness. Price remains the most important factor affecting purchasing decisions.

Serbian consumers are increasingly purchasing online especially cross-border retail for lower prices and this segment is expected to grow at an annual average rate of over 10 percent over the course of the next five years. Currently, e-commerce is 5 percent of total retail turnover at about $500 million a year with 2.9 million online shoppers. The number of shoppers is expected to increase to 3.9 million by the end of 2024. Read the full report from USDA Foreign Ag Service HERE.

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