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bne March 2023 Companies & Markets I 19
optimism globally, including in the Western Balkans, that economies were coming back to normal speed and there would be a pick-up in economic growth. But the war in Ukraine changed everything. It’s made everybody’s calculations for politics, economics and trade completely different,” says Belan.
She believes that going forward, the Western Balkan region risks being sidelined as Ukraine has become the top priority for the West, with the “attention of EU policymakers and investors away from the Western Balkans”.
“Priorities have absolutely changed. It’s now all about Ukraine, so it is much harder for this region to make a case for why the Western Balkans matters,” she says.
This is despite an awareness among EU policymakers that if they don’t pay enough attention to the Western Balkans, the region could “fall prey to malign forces – Russia continues to meddle all around through its proxies,” says Belan.
A rare positive from the war has been the increased awareness of the importance of European integration, which led to the long-awaited start of accession negotiations with Albania and North Macedonia, and candidate status for Bosnia, Moldova and Ukraine.
Serbia the loser
Serbia has been the clear loser from this new way of thinking. Belgrade has long been criticised by frustrated Western politicians for “sitting on two chairs”, a commonly
cited proverb. In fact it has been four chairs – or rather four pillars, according to the official line from Belgrade, which for a long time successfully balanced relations with the EU, the US, Russia and China. That stood it in good stead, as it was able to attract investment (and during the pandemic vaccines) from multiple sources, but it collapsed when Russia’s invasion of Ukraine suddenly polarised the world and made sitting on two chairs untenable, despite the government’s best efforts.
While almost all of the region is expected to receive much stronger FDI inflows in 2022, Serbia is the exception, as in nominal terms it saw a stagnation (for the data available so far), and FDI declined as a share of GDP. This is a big change, as Jovanovic notes that until now, “Serbia was considered to be the success story for FDI in the region”.
Specifically, investment from EU countries dropped sharply in 2022, accounting from only around one-third of the total compared with around 60% in previous years. By contrast, Chinese FDI increased a lot, and in 2022 China will be
the biggest investor, overtaking the EU for the first time. According to wiiw, data from the first three quarters show Chinese FDI at around €1bn, or 36% of the total, while from EU countries it is around €900mn, or 32%.
“For the same reasons as some companies left Russia, they are not investing in Serbia now. They don’t consider Serbia to be friendly to the West, to the EU. And because of that they are saying we don’t want to invest in this country which is a friend of Russia,” says Jovanovic.
North Macedonia, a recent Nato entrant and longstanding EU accession candidate, has seen a hike in foreign investment.
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