Strained by a foreign trade deficit, Serbia has high expectations from Fiat Automobiles' Serbian exports.
By Igor Jovanovic for Southeast European Times in Belgrade -- 11/10/12
The new Fiat model 500L was presented at the opening ceremony at the Fiat car plant in Kragujevac. [Reuters]
A large foreign trade deficit is one of the chronic problems of Serbian economy, which by September amounted to 4 billion euros.
The mass production of the new Fiat car model in Kragujevac, central Serbia, is making authorities hopeful they will be able to do something about the country's trade deficit.
Serial production of the new Fiat model 500L kicked off on July 4th, and the daily output is projected to reach 550 cars next month. The plan is for 2013 annual production to reach between 120,000 and 180,000 cars.
The new car, to be priced at about 14,000 euros in Serbia, is primarily intended for the European and US markets. The first cars were exported to Italy in mid-August.
The first buyer of the new Fiat model in Serbia was Mladjan Dinkic, the country's finance and economy minister, who took out a loan for the purpose.
Dinkic said many did not think Serbia would "produce a top-quality car," but pointed out he was confident "that this investment, of great importance for the overall economic development of Serbia, will succeed."
Economists, however, do not think the Fiat factory alone can revive Serbian economy, but that it could serve as an incentive for other foreign investors.
Miroslav Zdravkovic, economic analyst and editor of website Makroekonomija, said that if the exports worth a billion euros came true, the Serbian budget would receive between 100 and 150 million euros in income, taxes, new technologies and the involvement of local collaborators.
"Bigger exports certainly make Serbia more attractive in the eyes of other foreign investors," Zdravkovic told SETimes.
At the ceremony marking the sale opening of the new Fiat model in Serbia, Prime Minister Ivica Dacic expressed a wish for Fiat to become the biggest exporter in the state.
Zdravkovic said it is also important to change the structure of Serbian exports, because currently, only primary or semi-finished products are exported.
"In the next phase, the entire industrial production could change, in which we will become more like the countries that made it through transition successfully," Zdravkovic said.
However, not everyone is so optimistic as far as the new exports are concerned. Mahmut Busatlija, fellow at the Belgrade Economics Institute, warned that Fiat's exports from Serbia is starting at a time of crisis for the European automobile industry.
"There is still an economic crisis in Europe, and in such times the automobile industry and tourism always suffer the most, as people easily give up on a new car and traveling," Busatlija told SETimes.
Both economists agree, however, that Serbia will need many more investments like the Kragujevac factory to significantly improve the economy.
So far, the city of Kragujevac has reaped the most benefit from Fiat, which due to the collapse of the car industry in the 1990s bore the unfortunate moniker Valley of Hunger.
Mayor Veroljub Stevanovic described Fiat's investment as "something epochal that will bring a new atmosphere to Kragujevac and raise the citizens' living standard."
"More than 3,000 people will be employed in the factory and with Fiat's collaborators, and at least 10,000 people will indirectly be able to get jobs next year," Stevanovic told SETimes.