Eleventh Lap Time: Growth Plan

In 2023, most AmCham Serbia member companies registered growth, with an increase in both revenues and profits, but the firms were somewhat more cautious when it came to investment and new hiring, AmCham’s annual business environment and investor confidence survey has revealed.

Overall, AmCham members were ‘moderately satisfied’ with the Serbian business environment, which received a score of 2.9 (on a scale from 1, worst, to 5, best), an increase on previous years and the highest average core for the business environment since the survey was first conducted. At the same time, this moderate satisfaction has recorded a gradual but steady upward trend (increasing from 46 percent in 2016 to 78 percent in 2023), together with a notable reduction in the number of dissatisfied respondents (from 53 percent in 2016 to 14 percent in 2023). Non-member micro-enterprises and small businesses (MSEs) also surveyed for this study tended to share the same views as their larger peers, awarding the business environment a score of 3.

‘AmCham members are more optimistic for the coming year than they were in past surveys, done in the midst of crises caused by the coronavirus epidemic and the war in Ukraine. These rising spirits are a clear indicator that the economy has partially rebounded and that investor confidence has bounced back after past shocks, but it remains crucial for us all, together with the Serbian Government, to advance institutional reforms, primarily in the judiciary, health service, and labour regulations, as well as to address the shadow economy and pursue the Green Agenda. We hope the incoming government will have a clear mandate to carry out all the necessary institutional reforms and harness the EU’s Growth Plan to accelerate regional economic integration and access to the EU single market. Enhancing trading relations with the United States is a long-term commitment for AmCham, and, even though the relationship between the countries has been quite close, especially in terms of investment in consumer goods and rapid growth of trade in IT services, we hope they will continue to improve’, said Stefan Lazarević, AmCham President, commenting on the findings that suggest investors are satisfied with the Serbian business environment.

‘Companies that have come together in AmCham are amongst the most important partners for the Serbian Government, and, I can safely say, the engine of growth for our society, since many are IT firms that invest in new technologies. I would like to than AmCham for having trusted for so many years in our reforms that have helped American companies expand their business. The Serbian Government is doing everything to implement these reforms that, on the one hand, it has committed to on its path to EU membership, but, on the other, which are also key preconditions for attracting new investment and enhancing the business climate in our country. The principal reforms the Serbian Government is pursuing concern the rule of law and media freedoms – only today we have also been speaking with the European Commission about a new anti-corruption strategy – as well as higher economic and financial standards, transport, energy, and European networks. Of course, we do this to make headway with our EU accession efforts, but the primary objective is to ensure companies can do business better, grow, create jobs, and improve living standards for us all’, said Tanja Miščević, Minister for European Integration.

What are the key challenges for doing business?

Companies identified high inflation, labour supply, and government efficiency as the key hurdles they face when doing business. The persistent high inflation, which has been taking longer to diminish than in the eurozone, has been an obstacle for an extremely broad range of businesses, given the fall in customer purchasing power and the unpredictable increases in input prices. Labour supply was seen as a challenge by close to two-thirds of AmCham members and has consistently been one of the top two issues identified in these annual surveys for the past six years. Government efficiency was the third-ranked obstacle, as reported by as many as one-half of all AmCham members. This is a major increase when compared to challenges identified in 2022, pointing to the need to pursue faster-paced reforms to reduce the administrative burden on businesses, many of which were initiated by this and the previous cabinet but are yet to be fully implemented (such as digitalisation of the health service, online management of staff sick leave arrangements, digitalisation of employment contracts, online access to the judiciary, and the like).

Forecasts for 2024

As suggested by the more optimistic opinions of the business climate than in the last survey, forecasts for 2024 were also more hopeful than over the previous crisis-hit years. Some two-thirds of all AmCham members expected growth and new investment in the coming year, with one-half also forecasting new hiring. Though this bullish outlook indicates the economy and investor confidence have both rebounded somewhat, the record levels of enthusiasm seen in 2019 are yet to return, with the findings similar to those recorded in 2016.

What do businesses see as priorities for long-term growth and 2024?

For more than five years, AmCham members have prioritised efforts to tackle corruption, enhance the rule of law, and promote judicial efficiency as the key reforms the Serbian Government ought to take to systemically improve the business environment and foster long-term growth. These are also the fundamental reforms required for Serbia to make progress towards EU membership and access opportunities offered by the EU’s Growth Plan for the Western Balkans. Ranked second are continuing digital transformation and the development of e-government and consistent implementation of the Green Agenda. The third-ranked issue for AmCham members is tackling the shadow economy. The MSEs surveyed for this research also felt institutional reforms were the most sorely needed, although the order of priorities was somewhat different: their key concerns were a predictable tax system and an efficient tax administration, followed by efforts to reduce corruption and tackle the shadow economy. Finally, these companies also believed the government should make labour law more flexible and enhance the transparency of public procurement.

For several years now, more than two-thirds of AmCham members (67 percent) and a significant proportion of MSEs (62 percent) have viewed education as the top priority for public investment designed to promote growth in the long run.

Serbia and the region

As in previous years, the Serbian business climate was perceived as better than those of regional non-EU countries but worse than in EU member states, suggesting companies value policy predictability and the ability to use dedicated funds available only to EU members for costly reforms (such as those envisaged by the Green Agenda).

About the survey

AmCham conducted its Eleventh Lap Time survey with assistance from Ipsos Strategic Marketing. Fieldwork took place from July to October 2023. AmCham member companies were surveyed using an online questionnaire. A number of qualitative interviews were also organised, either face to face or online. Since AmCham members are predominantly large and medium-sized companies, as in previous years the survey included a sample of non-member MSEs. The idea behind capturing and comparing the views of large investors and small businesses side by side was to gain a better understanding of the state of Serbia’s economy as a whole and the steps needed to accelerate growth.

The full survey report is available for download at https://amcham.rs/wp-content/uploads/2023/12/11-B-SRP.pdf