If the crisis in Europe continues, Serbia’s economy will be in trouble

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The end of the year is an opportunity to review how the economy performed and make an analysis of the business in such complex circumstances on the international level. And how much has the geopolitical situation caused primarily by the Ukrainian crisis affected domestic businessmen?

The survey of the Serbian Chamber of Commerce showed that the Serbian economy continued with good business performance in the third quarter of the current year and that we still do not have a crisis situation, and that there is an obvious stability of the economic system.

However, since a recession is expected in the EU in the coming months, the business of business entities in Serbia will depend to a significant extent on its depth and duration. Bojan Stanić, assistant director of the Sector for Strategic Analysis in the Serbian Chamber of Commerce and Industry, tells BIZLife that the key macroeconomic indicators are that the Serbian economy is recording a positive result this year, which is partly a consequence of inertia from the previous year, when a record growth rate was achieved in the last 15 years.

However, we are witnessing the slowdown of the economy in the second half of the year, which is a consequence of the gradual spillover of the crisis from the EU, as the main foreign trade partner, he adds.

How did the economy perform this year?

According to the PKS survey on a sample of 1,800 companies, which employ 287,000 workers, the Serbian economy continued with good business performance in the third quarter of the current year, bearing in mind that almost the same number of respondents achieved turnover growth (37%) compared to the previous quarter ( average turnover increase of 23%), i.e. maintained the same turnover (38%).

A quarter of respondents (24%) noted a decrease in turnover compared to the second quarter of 2022. The majority of respondents expected a continuation of stable performance in the fourth quarter of 2022: 38% of respondents expected increased turnover, 42% of respondents expected the same level of turnover, while 21% of respondents expected a decrease in turnover.

The surveyed business entities in the third quarter of 2022 achieved an average capacity utilization of 74%, which is identical to the average capacity utilization in the second quarter of this year.

It is encouraging to know that 76% of surveyed companies have sufficient financial resources for optimal business financing. In the third quarter of 2022, employment was stable, bearing in mind that 86% of respondents did not reduce the number of employees, and that 93% of respondents do not expect a reduction in the number of employees in the last quarter of this year.

When it comes to whether the majority of businessmen managed to realize their business plans and which sectors are particularly sensitive now due to the geopolitical situation, Stanić says that generally speaking, all economic activities are under the influence of inflation, because the “whirlwind” of inflation influenced the increase as products, as well as services used in the business process of economic entities.

“The trend is still that information technologies are the most adaptable to crisis situations, but it should be emphasized that the processing industry is under greater pressure due to the drop in international demand and high energy prices,” he says.

The economy still does not have a crisis situation

Stanić points out that we still do not have a crisis situation, and that there is an obvious stability of the economic system, but that a recession is expected in the EU in the coming months, so the business operations of economic entities in Serbia will depend to a significant extent on its depth and duration.

“Nevertheless, it should not be forgotten that this year Serbia achieved a record inflow of foreign direct investments, especially investments accelerated in the second half of the year, which indicates the attractiveness of Serbia for doing business in these crisis circumstances at the European level.”

According to official statistics, the following activities achieved the greatest growth in industrial production in 2022: mining of metal ores, production of transport vehicles, production of coke and oil derivatives, production of tobacco products.

On the other hand, the decline in industrial production was recorded in textile production, coal mining, production of basic metals, wood processing and wood products.

In terms of services, there was a significant increase in activity in the areas of information technology and tourism, while weaker performance was recorded in construction.

What are the biggest challenges?

When it comes to what are the biggest challenges in business for businessmen in Serbia, but also in the region, and what they can expect in the coming year, taking into account the predictions of international financial institutions, Stanić says that the economy is no longer only concerned about the increase in production costs, but also about the realization of products and services. which they offer on the market due to the decline in the purchasing power of the population and the decrease in international demand.

Inflation is what has been happening for more than six months now, and the economy has somehow adjusted to it, so the bigger risk right now is a potential recession that is approaching.

What if the global crisis persists?

“The economic activity of Serbia in 2023 will primarily be determined by the development of the economic situation in Europe, under the influence of the geopolitical crisis caused by the war in Ukraine.” Economic activity in Europe, in addition to the war and the introduction of Western sanctions against Russia, was also affected by the general uncertainty regarding the sustainable supply of energy to the European population and economy, primarily natural gas and electricity. According to the estimates of most analysts, the basic scenario of the further development of the political-economic situation does not include a dramatic escalation of the war in Ukraine, but a gradual approach towards a kind of diplomatic solution to the crisis. According to that scenario, the crisis that is slowly changing from an energy crisis to a real-economic crisis should not be deep, that is, the European economy in the next year would be closer to stagnation than to a deeper recession. However,

Nevertheless, it is estimated that in the next year the growth rate of Serbia should be in the range of two to three percent.

If a recession occurs in the EU at the beginning of the year, and the current political crisis shows no signs of de-escalation, it can be said that even a 2% growth for Serbia would be a very good result, concludes Stanić, BizLife writes.

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