Still reeling from the announced departure of major foreign investor US Steel, Serbian officials have expressed fears over the vulnerability of the Balkan country’s economy and stressed the continuing importance of FDI to its growth plans.

Deputy prime minister Verica Kalanovic struck a dour note speaking at the Financing Growth in Serbia conference held in Belgrade in January, organised by fDi Intelligence and sister publication The Banker.

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“Although in 2010 we saw growth and recovery, I have to say the Serbian economy is in crisis. The global downturn has caused havoc for our economy,” she said, citing an unemployment rate that is among the highest in Europe, a raft of company closures and an exodus of emigrants as signs of economic distress.

 “Synergy between the global crisis and internal weaknesses has led the Serbian economy to a situation where it is really in serious trouble.”

Liquidity issues have hit small and medium-sized enterprises hard, but Ms Kalanovic said the departure of US Steel shows that big companies are vulnerable too. But she stressed that the government had put in place anti-crisis measures in 2008, including some aimed at boosting FDI, some of which “have had seriously good effects”.

Synergy between the global crisis and internal weaknesses has led the  Serbian economy to a situation where it is really in serious trouble

Verica Kalanovic

Serbia's minister of economy and regional development, Nebojsa Ciric – citing a planned investment by Italian automaker Fiat in Kragujevac that will employ between 3500 and 4000 people and amounts to Serbia’s largest inward investment in two decades – said there had been an upswing in FDI last year, however, and prospects going forward are promising.

“The 2011 overall result will be comparable to some of the best years for FDI into Serbia. We have seen a tremendous increase in project numbers compared with 2010,” he told delegates. “We have witnessed a better distribution across sectors, attracting investors with higher-value projects as well.”

Pittsburgh-based US Steel sold back its $33m plant in Smederevo – which it bought in 2003 – to the Serbian government for a symbolic $1, citing poor financial returns. The government is seeking a new buyer for the plant in an attempt to safeguard the jobs of its 5400 workers.