Cumulative Effects of Crisis Expected in Autumn

Based on the constant communication with its members and different surveys of several business associations from Serbia, BSN cross-analyzed the gathered data in order to create a realistic estimate of current situation in the economy.

After COVID-19 pandemics outbreak and after the removal of curfew in Serbia on 6 May 2020, whole of the economy, especially the SMEs, entered into the phase of stabilization of business which is still ongoing and is characterized by:

– Reduced turnover and income compared to the pre-crisis period (for majority of SMEs that is between 15 and 30 percent, but in significantly affected sectors such as tourism the drop is at 40-90 percent compared to the previous year)

– Delivery time and payments in foreign trade have increased (before the crisis foreign clients made payments on average between 30 to 45 days, now it increased to 60 to 90 days)

– Close to 60 percent of SMEs reorganized their processes, which again slowed their functioning (part of employees still works from home or are divided in other ways in the company, causing internal communication to slow down and worsen)

– More than 65% of SME managers claim it is very worrying that no new jobs are contracted for the autumn or early next year, especially with foreign partners. Contracting with resident partners has also been reduced (this is a consequence of a lack of international fairs, business conferences and difficulties in making travel arrangements)

– Payment periods on domestic market have a tendency of further increase (average pre-crisis payment period was around 135 days)

– 72% of SME managers said that they had to give up on investments in the machines, equipment and education of employees in this year, in order to save working capital (which in the long term is bad for the competitiveness)

– 44% of SME managers think they will have to conduct further rationalizations of business until the end of the year, including reduction of production, employee wages, and even workforce reduction if necessary (74% of managers said that they will fight to keep their employees as much as possible, as they need trained people and it is difficult to find adequate employees)

– 63% of managers consider that they cannot keep same level of taxes, contributions and parafiscal demands in current business environment and that it will be a reason why they have to rationalize their business

Conclusion would be that there is a real danger of cumulative effects of the crisis in the economy show in the autumn months, and additional risk is that delayed payments of taxes and contributions for March-May 2020 period, income tax, liquidity loans, and have to be paid in the beginning of 2021. For many SMEs that do not return to pre-crisis levels of activity then this will be a serious challenge.

Rough analysis shows that, due to all listed factors, between 90,000 and 120,000 workplaces will be endangered in autumn of 2020 and in the beginning of 2021, and that between 18 and 25 thousand companies and entrepreneurial stores  might shut down or enter into informal zone.