"Dun & Bradstreet": Better perspectives for Serbian business

(Photo: Ivana Vuksa)

Dun & Bradstreet, the world`s largest rating agency, still rates Serbia in the group of high business risk countries in its September report. This rating indicates the riskiness of the business environment in a country, providing information on the efficiency of payments to other countries and the profitability of potential investments, according to a statement made today by Rating, D&B`s exclusive representative in Serbia and Montenegro.

This month`s ratings are raised for Slovenia because of an improved economic outlook, Hungary due to accelerating growth and Iran owing to the impending removal of sanctions.

The highest ratings in the region are held by Slovenia and Croatia (DB3), followed by Bulgaria, Hungary, Romania, Albania and Macedonia. Serbia and Greece belong to a group of countries with high risk (DB5) with just Bosnia and Herzegovina holding a lower rating then Serbia in the region (DB6).

The outlook for the Serbian economy has improved following a second-quarter GDP growth of 0.9% compared with the same period last year. This is not an excellent rate for developing business on the EU`s doorstep, but it is a lot better than expected at the beginning of the year considering the government`s extensive spending cuts aimed at bringing the public finances under control.

Investment, the chief motor of growth, has been helped by a decline in interest rates (in August they fell to 5.5%), the lower oil price and an injection of foreign aid and capital aimed at renovating industry after the floods of 2014. Serbian exports are favoured by the recovery of demand in parts of the EU (especially Germany and Romania) and by a fall in the value of the dinar that improves the competitiveness of Serbian exports outside the euro zone.

On the other hand, the growth of imports, driven by the growth of investment, limits the positive effect of net exports. At the same time domestic consumption is still growing, though not as much as was feared to start with. Household consumption is feeling the positive effect of a growth in dinar assets and real wages (despite a low-inflation environment) and disposable income (following the fall in energy prices).

Similarly, government expenditure has not fallen as much as expected, but irrespective of the reasons (delays in restructuring the public sector) this is a bad sign for the public finances and industrial growth in the long run. Dun & Bradstreet is for now holding a 2015 GDP growth prediction of 0.5%, but is prepared to increase it if relevant third quarter indicators show signs of a continued positive trend.

Serbia`s business environment took a step forward with Belgrade assembly`s decision at the end of July to establish a free economic zone in the suburban municipalities of Obrenovac and Krnjača. According to the conditions in the free zone, the city will place 98 hectares at the disposal of companies that want to start work, cut taxes and free them from certain charges. The potential advantages of the free zone will be further increased by the construction of a new railway track connecting Belgrade and Budapest. This will be financed by Chinese capital, as confirmed by the bilateral meeting at the beginning of August.

These two projects together will enable foreign investors to set up business in one of the cheapest investment environments in Europe and to place their wares on the EU market rapidly. According to the Mayor of Belgrade, the Chinese company Meita is already planning to open a new, large factory in the free zone. This company will build this autumn a production hall for auto parts to a value of EUR 60m employing 1,400 workers.

Dun & Bradstreet (D&B) is the largest and oldest rating agency in the world, having existed for over 170 years. The rating company Rating d.o.o. has since its start in 2006 exclusively represented the interests of the company D&B in Serbia and Montenegro.

Translation provided by: www.halifax-translation.com