Impact of FDI on economic growth in the Republic of Serbia in the age of crisis caused by the pandemic COVID-19

Abstract

There is no general conclusion in the literature that foreign direct investment (FDI) contributes to the growth of the host country. The relationship between FDI and economic growth and their complexity is the most debated topic among economists. A significant number of studies conducted in the last few decades show how FDI boosts a country's economic development: it usually has a positive effect on the host country, although in some cases it can create limited benefits or even negatively affect the host country. The Covid-19 pandemic, viewed as an exogenous economic shock, has globally shown a significant negative impact and threat to the economy and financial markets, causing economic decline and recession. There was a significant decrease in GDP and consumption, a drop in labor supply and production, and a decrease in total FDI inflows at the global level by 42% in 2020 compared to 2019. The paper analyzes the impact of FDI inflows on economic growth in the Republic of Serbia during the crisis caused by the Covid-19 pandemic. By monitoring the fl ow of FDI inflows, it was determined that during 2018 and 2019 there was an increase in the level of investments (over 20% of GDP), while in 2020 there was a decrease in them (GDP of 1%). To accelerate the growth of GDP per capita in Serbia, it is necessary to improve institutions, education, as well as increase the investment rate.

Keywords

• foreign direct investments (fdi)
• economic growth
• republic of serbia
• covid-19 pandemic