Insight-ProCredit

On 10 April 2025, the National Bank of Serbia (NBS) announced that it would keep its key interest rate at 5.75%. This decision was influenced by several factors:

• Inflation: The inflation rate in Serbia stabilised at 4.4% in March 2025, down slightly from 4.5% in February. This rate is close to the upper end of the target range and requires careful monitoring to avoid further upward pressure.
• Economic growth: The Serbian economy showed robust growth in 2024, with cumulative real GDP growth of over 18% compared to pre-pandemic levels. This growth is expected to continue, with forecasts predicting a GDP growth rate of 4.5% for 2025.
• International reserves: Serbia’s international reserves are considerable, amounting to EUR 28.5 billion. This strong reserve position enables the NBS to intervene in the foreign exchange market if necessary and to ensure financial stability.

The NBS’s decision to maintain the interest rate reflects its commitment to balancing economic growth with inflation control and financial stability amid global uncertainties. This approach aims to support sustainable growth and protect the economy against external shocks.

Amir Salkanović from ProCredit Bank in Bosnia and Herzegovina talks about market trends such as digital banking, sustainability and e-commerce growth. The country offers access to EU and South Eastern European markets as well as a skilled workforce, particularly in metalworking, woodworking and IT.

Read more: Full interview

In 2024, Bulgaria established itself as a major player in the economic landscape of South Eastern Europe, driven by extensive foreign direct investment (FDI) and a large number of German companies. With 4,000 German companies operating in the country, Bulgaria has attracted considerable FDI, which has driven economic growth and fostered a positive trade trend.

Key growth drivers:

• Strategic location and infrastructure: Bulgaria’s favourable geographic location and improved infrastructure played a vital role in attracting foreign investment.
• Business-friendly environment: The country’s favourable business climate made it an attractive destination for international companies.
• Sectoral contributions: Significant investments in sectors such as manufacturing, energy and tourism have strengthened the economy’s resilience.
Trade and investment highlights:
• FDI inflows: In the first 11 months of 2024, Bulgaria recorded FDI of EUR 1.49 billion, which corresponds to 1.5% of its GDP.
• Trade performance: Despite a slight decline in exports, Bulgaria’s trade dynamics remained strong, supported by increased imports and a diversified export base.

Future outlook: Looking ahead, Bulgaria stands to benefit from continued regional integration and infrastructure improvements. The economic outlook remains cautiously optimistic, with expectations of continued FDI inflows and trade growth, although challenges such as geopolitical tensions and the need for structural reforms remain.

At the beginning of April, Vassil Todorov, Head of the Renewable Energy Center, represented our group together with colleagues from ProCredit Bank in Romania at Energy Week Black Sea in Bucharest.

In recent years, Romania has significantly increased its renewable energy capacity, particularly wind and solar power. Important mechanisms such as contracts for difference (CFD) and a modernisation fund are driving this further growth. Financing these projects requires the assessment and management of various risks, including ensuring price stability through the use of power purchase agreements (PPAs).

ProCredit Bank actively supports project financing in the field of renewable energies. In 2024, we opened our Renewable Energy Center to provide centralised support for project financing in South Eastern and Eastern Europe. To date, the ProCredit group has financed well over 850 MW. Our latest Impact Report (as of 31 December 2024) will be published in May 2025.

We had the opportunity to speak with Vladimir Domentii, Member of Management Board at ProCredit Bank Moldova, who provided valuable insight into the business landscape in Moldova. The country is witnessing economic recovery, digital transformation and sustainability initiatives.

Positioned between Romania and Ukraine, Moldova offers strategic access to EU and CIS markets, competitive tax rates and a skilled workforce. ProCredit Bank Moldova supports local businesses in their growth and sustainability efforts. Its priorities include supporting SMEs, digitalization, sustainability and strengthening client relationships.

Read the full interview.

South Eastern Europe

Overview: In particular, trade relations between the countries of the Western Balkans (Albania, Bosnia and Herzegovina, Kosovo, North Macedonia and Serbia) and the European Union are characterised by growing economic integration. The EU is the leading trade partner for these countries, accounting for about two-thirds (66.7%) of the region’s total trade, while the Western Balkans represents about 1.5% of the EU’s total trade.

Germany dominates trade with almost all countries, particularly in the areas of machinery, transport equipment and industrial goods.

Important highlights:

• Bulgaria: With 4,000 German companies in the country, Bulgaria is second only to Romania in terms of German business presence. The inflow of foreign direct investment (FDI) from Europe, the relatively favourable business climate and the country's strategic geographical location have contributed to a positive trade trend.
• Serbia: Serbia is now home to 900 German companies and enjoyed a boom in European FDI in 2024. The considerable corporate presence correlated with a positive trade trend for the country and emphasised the role of foreign companies in economic growth.

Eastern Europe

Overview: The Eastern European countries in which the ProCredit group operates also experienced steady to significant FDI inflows, with a generally positive impact on trade figures in 2024. Once again, the presence of German companies is supporting economic development and resilience.

Important highlights:

• Romania: Romania was the top destination for European FDIs in 2024 and is also ahead in this respect, with 9,500 German companies operating there. 21.1% of Romanian exports went to Germany and 14.5% of European FDIs came from Germany.
• Ukraine: Despite enormous challenges, Ukraine is still home to around 2,000 German companies operating in a wide range of sectors. The presence of foreign companies strengthened the economy’s resilience. Overall, positive growth in GDP is forecast for 2025.

The bottom line

Foreign direct investment, intensified trade relations with Europe and especially Germany, and a strong and lasting presence of German companies played a decisive role in the economies of these countries in 2024.

The economic outlook for these regions remains cautiously optimistic. South Eastern Europe is expected to benefit more from ongoing regional integration and infrastructure improvements, which in turn will attract further foreign investment. In Eastern Europe, further recovery can only be expected if geopolitical tensions do not intensify, so that FDIs and more intensive trade relations could remain a stable pillar of growth.

Sources:
https://bnro.ro/Statistical-surveys-18952.aspx
https://nsi.bg/en/content/766/statistical-data
https://www.eastcapital.com/insights/the-stars-are-aligned-for-eastern-european-markets-in-2024
https://emerging-europe.com/analysis/growth-in-central-and-eastern-europe-will-strengthen-in-2024/
https://www.linkedin.com/posts/ost-ausschuss_osteuropa-zentralasien-exporte-activity-7284565066400563201-Bc7n?utm_source=share&utm_medium=member_desktop&rcm=ACoAAD2x0RkBxWdQEU6xEy0JFsimTbtBWQEJlN4

The European Payments Council (EPC) has approved the admission of North Macedonia and Moldova to the Single Euro Payments Area (SEPA). This decision will enable faster, more cost-effective and reliable cross-border euro payments, improve economic integration with the EU and optimise financial transactions for citizens and businesses. The geographical scope of SEPA is thereby extended to 40 countries.

From April 2025, financial institutions in these countries will begin implementing the SEPA schemes (i.e. standardised procedures for simplified and more efficient euro payments), which should be fully operational in Europe by October 2025. This integration is an important step forward in the EU’s growth plans for the Western Balkans and Moldova.

The inclusion of North Macedonia and Moldova in the SEPA area underlines the commitment of these countries to European financial standards and paves the way for further future cooperation.

Several countries in South Eastern Europe showed promising economic growth:

• Serbia: 3.9% GDP growth, supported by strong foreign direct investment.
• Kosovo: 3.8% GDP growth, bolstered by foreign investment.
• Albania: 3.3% GDP growth, spurred by investments and a favourable business environment.
• Bosnia and Herzegovina: 2.5% GDP growth, driven by foreign investment.
• Bulgaria: 2.3% GDP growth, thanks to strategic location and foreign investment.
• North Macedonia: 2.2% GDP growth, generated by economic activity and investments.

The region as a whole performed robustly. The strategic geographical location and infrastructure are decisive factors, but political instability and bureaucratic hurdles remain challenges. The “Common Regional Market Action Plan 2025-2028”, which was signed at the Western Balkans Conference in October 2024, aims to promote growth and increase convergence with the EU.

In Eastern Europe, the economy grew steadily in several countries:

• Georgia: 7.6% GDP growth, driven by investments in agriculture and technology.
• Moldova: 2.6% GDP growth, supported by investments in manufacturing and services.
• Romania: 1.9% GDP growth, propelled by industrial production and foreign direct investment.
• Ukraine: 3.0% GDP growth despite obvious challenges.

Eastern Europe showed strong economic resilience, particularly in Georgia. Its strategic location and an improved business environment attracted investment, but geopolitical tensions and the need for reform remain critical. The European Outlook 2025 emphasises the importance of innovation and integration with the EU.

The bottom line
GDP growth in the countries in which ProCredit Bank Germany operates was influenced in 2024 primarily by foreign direct investment, including from German companies, and by a number of other very diverse factors. Overall, however, the economies proved to be relatively resilient and adaptable, which is reflected in the growth rates mentioned above. 2025 continues to offer promising opportunities for German companies in the region.

Albania recorded impressive GDP growth of 3.3% in 2024. This growth can be attributed to several factors:

• Government spending: Government spending, particularly on infrastructure projects and public services, increased by 6.8%. This includes building roads, bridges, and public facilities. Such projects increase economic activity while also improving infrastructure and quality of life.
• Tourism: The resurgent tourism sector also contributed to growth. In 2024, more than 1.7 million international visitors travelled to the country – 59% more than in the previous year.
• Construction: The construction industry reported strong growth, with a year-on-year increase in construction volume of 14.5% (June 2024 vs June 2023).
• Foreign direct investment: Significant investments were made in the energy, tourism and real estate sectors. In the first quarter of 2024, foreign direct investment rose by 15.3% year-on-year. The Albanian government has enacted special laws to promote strategic investments and attract foreign investors.

Future trends

• Economic reforms: Albania is moving ahead with its economic reforms to improve the business climate. These reforms aim to increase productivity, reduce bureaucracy and boost competitiveness.
• EU integration: The progressing integration with the European Union is opening up new trade and investment opportunities. EU accession negotiations are energising economic development and promoting alignment with European standards.
• Infrastructure: Further investments are planned in the transport and energy sectors. Projects such as the modernisation of the rail network and the expansion of renewable energies aim at improving infrastructure and promote future sustainability.
• Green initiatives: There is a strong focus on renewable energies. Initiatives to promote solar and wind energy and improve energy efficiency are underway to reduce environmental pollution and foster more sustainable development.

Albania is headed for growth and the way is paved for a prosperous future.
If you are interested in doing business in Albania, contact our specialists at: procreditbank.de/en/business-clients/south-eastern-europe-desk.

On 21 November 2024, Albania officially joined the Single Euro Payments Area (SEPA).
• According to the European Payment Council calendar, financial institutions in Albania and Montenegro will be able to join the SEPA payment systems starting in April 2025.
• The operational readiness date (ORD) for payment service providers (PSPs) from these countries will be announced at a later date.

This is a significant step towards European integration and offers new opportunities and a number of advantages for companies.

• Impact of SEPA membership on Albania
- Lower costs for cross-border payments
- Simplified processes expected to improve the country’s competitiveness

• Advantages for businesses
- Payments are faster and much easier, improving interactions with the European market
- Lower transaction costs

ProCredit Bank Germany will support its clients in Albania as they adjust to this new environment, ensuring they are able to quickly benefit from the new possibilities.

In November, we partnered with the German Committee on Eastern European Economic Relations to host an online session entitled “Insight into cross-border banking in South-Eastern and Eastern Europe”. Klaus Keilmann, Head of Corporate Strategy & Development at ProCredit Bank Germany, hosted the event and presented insightful views on the region’s political, economic and regulatory landscape. The discussion centred on the challenges for foreign trade, but also the opportunities for companies.

The presentation addressed the economic and regulatory conditions in South Eastern and Eastern Europe and highlighted the special features associated with tax and wage cost developments. Klaus Keilmann also addressed the current geopolitical challenges, which have been further exacerbated by the ongoing conflict in Ukraine. Despite these challenges, the dynamic development of the private sector and the increasing foreign direct investment that is currently making the region attractive to investors were highlighted.

You can find more detailed information in the presentation.

The European Commission’s growth plan for the Western Balkans, launched in 2023, aims to integrate these countries into the EU's single market. With financial support of EUR 6 billion, the plan promotes regional cooperation and reforms until 2027.

As part of the growth plan, countries will gradually be given access to the SEPA zone to carry out cost-effective euro transactions. Montenegro and Albania will be the first Western Balkan countries to have access to SEPA in 2025.

In 2025, the World Bank forecasts an economic growth rate of 3.7% for the region, driven by rising consumption and investments. Investments are expected to grow by up to 6.5%, which underlines the importance of ongoing structural reforms for sustainable economic stability.

Do you need support for your activities in South Eastern Europe? Contact our team: South Eastern Europe Desk – ProCredit Bank Germany

Source:
European Commission Growth Plan
World Bank Western Balkans Economic Report

Serbia expects strong GDP growth of 4-5% in 2025, supported by the “Leap into the Future - Serbia Expo 2027” project. Further positive indicators include:

- Inflation: Stable at 3±1.5%
- Foreign investment: Steady inflows
- Labour market: Unemployment rate of 8.2%, employment rate of 51.4%
- Fiscal health: Budget surplus, national debt at 46.8% of GDP, credit rating BBB-
- Banking stability: NPL ratio of 2.7%

These robust economic conditions provide opportunities. One risk is the relevance of the German market for the Serbian economy. A deterioration of the German economy could have a negative impact on Serbia’s economic development. Together with our colleagues in Serbia, we are happy to support you with market expertise and local knowledge.

Link to our South Eastern Europe Desk: South Eastern Europe Desk – ProCredit Bank Germany

Sources:
National Bank of Serbia - Macroeconomic Developments in Serbia - January 2025
Germany Trade & Invest (GTAI) - December 2024