Serbia’s economic activity is heavily influenced by the shadow economy, which accounts for over a fifth of its GDP and €14.7 billion in 2023, despite a gradual decrease over the past decade. A recent study conducted by professors from the Faculty of Economics in Belgrade revealed that the grey economy fluctuates, averaging 23.6% of GDP from 2009 to 2023 and peaking at 29.1% in 2013. In recent years, there has been a resurgence in the grey economy, but it remains smaller than its peak in 2013 in both the consumption and income domains.
Unreported earnings account for about 6.8% of GDP or €4.7 billion in the income domain, one of the lowest levels in fifteen years. The state’s leniency during the economic crisis and political changes, as well as tax collection system inefficiencies contributed to the growth of the shadow economy until 2013. However, post-2013 improvements such as digitalized inspection systems, penal policy reforms, and labor market flexibility led to a noticeable decline in unregistered activities.
Despite these advancements, challenges remain for public finances and equitable business conditions due to persistence of grey economy. The report calls for strengthening inspection services capacity and efficiency, reducing fiscal burden through regulatory reforms implementation, promoting cashless transactions and boosting tax morale to further suppress shadow economy.
Overall, while progress has been made in recent years towards reducing unregistered economic activities’ impact on Serbia’s financial landscape significantly with lower levels of unreported earnings compared to previous years; however much work still needs to be done to achieve sustainable growth that benefits all stakeholders involved – including businesses owners, consumers and citizens alike – while ensuring compliance with laws and regulations that govern financial transactions within Serbia’s borders.
