Serbia’s government should advance public sector reforms, including privatisation and restructuring of state-owned enterprises (SOEs), the European Bank for Reconstruction and Development said on Tuesday.
“Significant contingent fiscal risks still stem from large, unreformed SOEs. Better SOE management could also contribute to stronger growth performance and increased resilience to shocks,” the EBRD said in its Transition Report 2018-2019.
Small and medium-sized enterprises (SMEs) would benefit greatly from the development of non-bank financial institutions and improved tax-related practices, including simplified tax procedures, lower para-fiscal charges, and better predictability of tax decisions and services to taxpayers, the bank said.
Further efforts are needed to support market transactions in non-performing loans (NPLs), EBRD noted.
“Efforts should focus on easing access to information for potential investors on NPL portfolios, improving out-of-court restructuring and conducting more efficient judicial processes.”
“Rightsizing” of the state administration remains a key government priority and, since 2015, the number of public employees has been reduced by close to 30,000, as planned. However, merit-based recruitment and dismissal procedures have not been implemented, and problems remain with political influence in hiring and the high turnover of senior civil servants, according to the report.
There is still further room for accelerating NPL sales and, eventually, restructuring the debtor companies. The main obstacles relate to strict bank secrecy rules, preventing potential buyers from getting adequate information on NPL portfolios, restrictions on retail NPL sales and NPL sales to foreign entities, as well as inefficient judicial processes, the bank said.
The EBRD expects Serbia’s GDP growth to quicken to 4.2% in 2018 from 2.0% last year.