Serbia: Measures to preserve jobs and support the economy
After providing safeguards for employees and the most optimal organization of work, it is time for adopting effective measures to maintain the business of companies and the unobstructed flow of money and products. Like most countries in Europe and the region, Serbian government has adopted a set of economic measures to reduce negative effects caused by Covid-19 pandemic and support Serbian economy, presented by the Minister of Finance, Sinisa Mali. These are measures with an estimated effect of RSD 608.3 billion (half of Serbia's budget and 11 percent of our GDP).
1. Delaying payment of tax liabilities
2. Direct payments to businesses
3. Maintaining the liquidity of business entities
4. Direct aid payments
The first set of measures mostly assumes postponing payments of tax liabilities for at least three months, with later payment in installments, at the earliest from the beginning of 2021. As he states, it is about postponing payment of taxes and contributions to earnings, postponing of the payment of advance income tax for the second quarter and exemption from paying income tax on donations.
Furthermore, the state will give all entrepreneurs, lump sum tax entrepreneurs and small businesses three minimum wages for each employee, that is to say, they will pay 90,000 dinars directly into their account. It also proposes paying 50 percent of the earnings to anyone who has received a termination of work decision at large companies. The first installment of the announced payroll assistance is expected to be received from mid-May, the minister said.
The third measure involves support for private sector liquidity and € 2.2 billion has been defined for this. The funds will go through the Development Fund, and it is about cheap loans with one percent interest for entrepreneurs, micro and small businesses. The second part of the measure is related to warranty support schemes for liquidity and current assets.
The last element of economic measures is a direct assistance to every adult citizen of 100 euros in RSD equivalent a few weeks after the end of the state of emergency.
Sectoral support for some industries most affected by the pandemic was also announced. They are also working on adjusting corporate bond regulation as one way of financing large companies.
The measures will not apply to businesses that have reduced their staff by more than 10 percent, not including part-time employees, whose contracts expire during a state of emergency, as well as to those who temporarily ceased operations prior to the declaration of emergency on March 15th.
A concrete plan for the implementation of the measures is expected by April 10th.
Earlier, the Serbian government decided that there were no wage cuts, no layoffs, and no pension cuts in the public sector. Also, salaries for health care workers have been increased by 10 percent and one-time assistance of 4,000 dinars will be paid to the retired.
The National Bank of Serbia (NBS) has already declared a delay in loan repayment (moratorium), and the right for the temporary delay of installments payment will be granted to individuals, farmers, entrepreneurs and business entities who request it. The delay in repayment may not be less than 90 days during which the debtors will not be obliged to repay their obligations under the loan or leasing.
The set of risk measures was created on the basis of the current situation and does not exclude the possibility of new measures if necessary.
Economists predict that the consequences of the pandemic will be significant for the world economy. The latest estimations of global economic growth this year are just 0.4 percent, which would be the slowest growth since the economic crisis in 1982. However, it is also believed that, after a sharp decline in the second quarter, the global economy will recover by the end of the year. For now, Serbia is projected to see an annual decline in economic activity for 2%, and the overall deficit for 2020 could be at 9% of GDP.
ANALYSIS: Impact of a pandemic on micro and small business in Serbia
According to a survey by the Smart Collective and the Responsible Business Forum, 85% of micro and small businesses (employing 629,000 people in Serbia) estimate that the pandemic will have a negative impact on their business.
When it comes to the challenges posed by the pandemic companies, the most significant are the reduced demand for products and services (80.4%), followed by the inability to meet obligations towards the state (61.2%), payment and liquidity problems (45.9%), customer outflow ( 44.5%), lack of current assets (41.6%), and unreasonable costs for this period (32.5%). Almost half of the companies will not be able to overcome the current crisis without additional support, and the overwhelming majority of respondents repeated that support in the form of tax relief and contributions to the state, as well as direct financial support, is most needed at this time.
When asked if the company will be able to continue with the strategic plans and projects started this year, 40% of the companies answered NO, while 42% are uncertain.
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