In BMI’s revised Food and Drink Business Environment Ratings (BER) regional matrix for Q309, Serbia no longer occupies the bottom place in the Central and Eastern Europe (CEE) matrix. In fact, it is placed11th, out of 14 key markets in the region, above Bulgaria, as well as Latvia and Estonia, although thechange is due more to the considerable worsening of those countries’ scores, rather than an improvement of Serbia’s compound figure. In fact, Serbia is also expected to post growth contraction in the currentyear, which will - in addition to rising unemployment and a potentially explosive political situation with Kosovo - weigh down on the country’s food and drinks expenditure.
Indeed, we have revised down our Serbian growth forecast for 2009, and now project a 1.6% contraction(compared to our previous expectation of a 0.8% expansion). The amendment to our forecast is based onan expectation of a further slowdown in external demand and fall in capital inflows. A marginal recoveryof 1.2% growth is projected in 2010. However, we expect to see signs of a recovery in H210 and amarked improvement in 2011 - with growth forecast to rise to 3.5%. In the meantime, the country willcontinue to rely on IMF funding, having already secured an US$520mn Stand-By-Agreement (SBA), inorder to ensure stability and financing for the country amid the global economic crisis.
Nevertheless, there are positive developments within the food and beverages industry in Serbia. In April2009, Medela - a Serbian confectionery producer - announced plans to increase its production capacityby 50% in 2010, despite the current financial crisis. Similarly, Bambi Banat, one of the most prominentconfectionery manufacturers in Serbia, recently opened a new chocolate factory in Serbia. Around thesame time, Kosovo-based soft drinks manufacturer Bibita acquired a licence from the American juicemaker Tampico Beverages to manufacture and distribute juices under its brand. Tampico, the top-sellingrefrigerated juice brand in the US, is aiming to expand its currently limited presence in Europe, althoughBMI is cautioning that the unresolved political relationship between Kosovo, Serbia and the internationalcommunity will hamper faster export growth.
However, there is no doubt that the financial crisis is biting. For example, local brewer Beogradskaindustrija piva (BIP) reported that its investment in the construction of a new beer factory has beenpostponed. In fact, according to local press, scheduled foreign investment worth around EUR800mn(US$1bn) has been cancelled, in the face of continuing economic crisis. In the meantime, the RomaniabasedForeign Investors Council (FIC), an umbrella organisation for over 100 multinationals engaged invarious industrial activities, is predicting that foreign direct investment (FDI) into Serbia will be on holduntil Q309 at least, with companies expected to return to the country with the first signs of improvement.
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