15 May Interview with Lazo Ostojić, CEO Belgrade Stock Exchange, Serbia
How resilient has the Serbian economy been in the face of macroeconomic challenges from COVID-19, the Ukraine war and the energy crisis?
Serbia has successfully tackled global challenges including COVID-19 pandemic, disruptions in supply changes, conflict zones in Ukraine and Gaza, energy supply shortage and rising prices. We have certainly felt the consequences, like most other countries, but we had a significantly smaller decline than others and managed to recover quickly. Investment security is very important for the capital market development. The proof that the Serbian economy is stable was confirmed at the end of last year, when for the first time in history, Serbia received an investment credit rating from S&P at the level of BBB-.
The Serbian economy continued its successful growth in 2024, with a GDP increase of 3.8%, marking one of the highest growth rates compared to countries in the European Union, achieving an absolute value of €81.9 billion.The Republic of Serbia is a leader in attracting foreign direct investment with over $4 billion in 2024, thereby strengthening the macroeconomic landscape. In the past few years, the Serbian economy, thanks to the appropriate measures of the government, managed to overcome all challenges and continue its growth and the implementation of planned projects. Much has been invested in road, railway and energy infrastructure.
How is Serbia moving away from traditional economic pillars such as agriculture towards more innovative sectors such as IT and technology?
After the crisis in 2008, trading on the Belgrade Stock Exchange was in constant decline. After a short recovery, the crises of Covid and war in Ukraine once again affected the development of the domestic capital market. However, in 2024, the Belgrade Stock Exchange (BELEX) experienced a trading volume increase of over 70% compared to 2023, amounting to €310 million and the growth of the Belex 15 index and the Belexline.
In order to diversify financing sources and increase the level of eligible liabilities and strengthen indicators of minimal request for equity and eligible liabilities (MREL ratio), in June 2024 Raiffeisen Bank issued a long term RSD MREL bonds in total value 6 billion RSD ($58.2 million) and maturity term June 2028.
Inclusion of MREL eligible bonds is a first step in strengthening the offer for financial instruments at Belgrade Stock Exchange as one of the key elements in the implementation of the national Capital Market Development Strategy. Unfortunately, there have been no IPOs or major M&A transactions in the last few years. However, we are very optimistic that this situation will change significantly in the next two years.
What are some of the key milestones and achievements of BELEX over the past 140 years, its significance and support to the economy of Serbia and how is it working hand in hand with the government to ensure economic success of the private sector?
I would like to proudly point out that the first law on stock exchanges was passed in 1885 and that the Belgrade Stock Exchange began operating in 1894. It is one of the oldest in this part of Europe, confirming that there was trust in the capital market, which was very active and contributed to the overall progress of the Serbian and later Yugoslav economy until the beginning of World War II.
Following the turbulent second half of the 20th century, towards the end of 1980s, with the onset of economic and social reforms, the work of BELEX was renewed, trading mostly with short-term securities. A significant uptick in trading began after 2000, when shares from privatization started to be included in the market and the Exchange improved its trading systems, with the first IPO in 80 years being organized in 2018.
It is important to highlight that four years ago, the Serbian government adopted the Strategy for the Development of the Capital Market and signed a strategic agreement with the Athens Stock Exchange to enhance trading and transfer technology. A significant step towards further strengthening of the Belgrade Stock Exchange followed in 2023 when the government acquired a majority stake and increased its capital.
Over the past three years, the government has taken significant steps to improve and develop the capital market, strengthening all institutions through the initiation of various projects and programs, the most notable being the corporate bond issuance program aimed at enhancing transparency and improving conditions for alternative borrowing for companies, thereby enabling further growth. At the end of 2024 and the beginning of 2025, a significant improvement of the IT system was carried out and synchronized with the system of the Athens Stock Exchange, which holds shares in the Belgrade Stock Exchange. In this way, sound foundations were created for attracting new issuers and investors.
There were some difficult times in the past, but it is important to note that the Belgrade Stock Exchange is still here and will continue to be. The potential of the Belgrade Stock Exchange will be seen day by day. We were hidden in the shadows for a decade, or even longer. But we are ready to come out into the light and the future is bright!
What is your assessment of the ease of doing business in Serbia: what guarantees and protection mechanisms exist for local businesses from SMEs to large corporations?
Small and medium-sized enterprises are one of the pillars of an economy and offer great opportunities for development, create jobs and contribute to overall economic growth and stability. The resilience of these businesses is key to the continued progress of any country. Investing in the economy is extremely important, because we know that only a stable and strong economy can contribute to the growth and development of all other sectors. Therefore, the state strategically approaches the support of the MSMEs sector and provides constant support to this sector through various support programs and in cooperation with commercial banks.
Connecting the state and the SME sector has been enabled through the development of business incubators, scientific parks, development funds, agency for development and innovative funds. There is a strong IT community, good educational system and many other mechanisms, which can provide additional services to the SME sector. Additionally, the EU very actively participates in projects that promote entrepreneurship and self-employment in Serbia and that help the SME sector to increase the volume and capacity of trade in the country, as well as with companies in the EU.
How would you evaluate the country’s progress when it comes to transparency and good governance and what is BELEX doing to ensure companies comply and are transparent in their operations?
Transparency, good governance and compliance are recognized as key elements within the National Strategy for Capital Market Development. The regulatory and institutional framework is set so that year after year we can say that progress is being made in this field. In these processes, the state plays a big role, as well as the help of international institutions. We owe a lot of gratitude to the World Bank, which supports the capital market development project.
A lot of work is being done to raise awareness about the need for transparency in business, good corporate governance and promoting top ethical values. In parallel, work is being done on the education of all participants and raising the financial literacy of the entire population. Can we do better? Certainly yes, but the strategy and accompanying documents in the form of action plans significantly contribute to further progress in this field.
For us, the major breakthrough is the fact that Serbia has received an investment grade credit rating for the first time ever BBB- by S&P in October 2024. While maintaining stability, the country also managed to achieve GDP growth in 2024 by 3.8% and projection of growth in 2025 by 4.2%.
Further harmonization of the Belgrade Stock Exchange, the Securities Commission and the Central Securities Depository bylaws in 2022 enhanced the regulatory compliance. In terms of transparency, the analysis of the state-owned enterprises was carried out in order to assess their readiness for inclusion in the Capital Market. The complete regulatory reform encompassing all stakeholders included Capital Market Framework, Investment Funds and FINTECH laws, tax reforms and Institutional Investment regulations, setting firm ground for good business operations and further growth in compliance with the regulation.
How significant is the move toward environmental, social and governance (ESG) and green investments in Serbia and what is the government doing to incentivize these investments?
Green and ESG investments are on the increase. Maybe still not as much as we would like, but it is certain that there is room for further progress in this field. Based on the Environmental Protection Strategy, it is estimated that Serbia will need over €27 billion by 2033 to implement everything envisaged under the Green Agenda. This amount will be provided from several sources of financing and given the continued growth in demand for sustainable investments, green bonds will also remain a key instrument for financing green projects.
Elixir Group is the first company set to become corporate bond issuer under the Corporate Bond Issuance Program as a green bond in the amount of €35 million with the planned issuance scheduled for March 21st. As a leader in the chemical industry of Southeast Europe, Elixir Group aims to redefine sustainable business standards through innovative projects. Through its Green Bond Framework, the company has established a platform for financing projects focused on decarbonization, circular economy and production enhancement. This framework has been assessed by the global leader in ESG research, Sustainalytics, which confirmed its alignment with the highest standards of the Green Bond Principles 2021 in its Second-Party Opinion issued in January 2025. So far, we have nine companies ready to issue corporate bonds, another 15 are in preparation and this is an invitation to companies to seize the opportunity.
What is the importance of US investors in the country and the main areas of interest for US investors? What is BELEX doing to work with US and other foreign investors?
American investors are positive about doing business in Serbia due to the strategic location of the country, well-educated English-speaking people, competitive labor costs, generous investment incentives and free trade agreements with the EU and other key markets. The state invests great efforts in attracting foreign direct investments and there is significant support in all spheres, from incentives in establishing companies, obtaining various permits, to grants for the employment of local labor and tax relief. Considering the good political and historical relations between our countries, US investors are more than welcome.
I believe that the development of the capital market and the offer of new forms of financial assets on the Belgrade Stock Exchange will be an additional impulse to attract large investors, i.e large investment banks, funds, etc. In addition to the corporate bonds market, Serbian Eurobonds are a very attractive financial instrument.
The Belgrade Stock Exchange is planning to align its operations with the Markets in Financial Instruments Directivestandards to enhance its visibility among foreign institutional investors. This initiative aims to facilitate easier access for foreign investors, including those from the US, to our market, while also ensuring increased security and transparency.