Post-election jitters seen as halving investment in Serbia

BELGRADE (Reuters) – Foreign direct investment in Serbia could halve this year as investors have been unnerved by a political crisis following January’s inconclusive elections, a senior government official said. Jasna Matic, state secretary at the Economy Ministry, said total foreign investment is seen at $2-2.5 billion for the year, compared to almost $4 billion in 2006. «From January to May, we had a total of $1.2 billion, which is less than we had hoped for,» Matic said. «And most of that money came from deals arranged in 2006.» January elections were followed by months of political limbo as pro-Western political parties failed to agree on a government, raising fears that the ultra-nationalist Radical Party could come into power and slow reforms. «In the second half of the year, we can expect even less investment as the government was not active in talking to investors earlier this year,» Matic added. «The low level of foreign investment will affect the country’s growth. Growth could have been higher had we had more foreign investment.» Serbia has posted healthy economic growth since the fall of nationalist autocrat Slobodan Milosevic in 2000 ended a decade of wars and isolation. In 2006, growth stood at 5.7 percent, down from 6.2 in 2005. The 2007 budget sees growth at 5.9 percent, but some government officials have said it could top 7 percent. In July, Standard and Poor’s revised down its outlook for Serbia to stable from positive, keeping the country’s long term rating at BB-. Fitch kept its rating at BB- with a stable outlook but noted that political risk «remains a material constraint on Serbia’s sovereign rating.» Earlier this month central bank figures showed that total foreign investment in the first five months of the year, including the portfolio investments which were measured for the first time, was $1.8 billion. Most investment this year has gone into food processing, retail trade, hotels, restaurants, financial services and real estate, central bank figures showed.