USAID Cooperation for Growth Project

One year to recover from the crisis

It will take an average a one year for the Serbian economy affected by the coronavirus pandemic to recover from the crisis, according to the results of the third iteration of "Overcoming the crisis together" survey, conducted by the Serbian Chamber of Commerce and USAID's Cooperation for Growth Project. The micro-enterprises have been hit hardest by the crisis, while the liquidity remains as one of the key problems that firms have been facing. Digital solutions have been recognized as an essential part of a recovery strategy and business continuity.

The most respondents in the survey, conducted from June 8 to June 15, estimated to recover within a one year, almost every third company believes that three to six months will be enough, while the most affected sectors - tourism, transport, and creative industry - expect a recovery longer than one year.

Fears of a new-prolonged crisis are most present among businessmen, as many as 73 percent of companies are afraid of the second wave of the pandemic and repeated lockdown. One-half of all companies (50 percent) fear a drop in demand for their products or services. About 40 percent expect to face issues with liquidity, access to finance, and/or changes to import/export policies. Nearly one-third expect to see recovery hampered by restrictions on public gatherings and/or new product/service quality standards, mainly determined by their industry.

By far most companies (92 percent) are expecting revenues to fall this year compared to 2019. The biggest losses will be in tourism, creative industry, and transport, followed by the industry of various manufacturing activities and the IT sector. A quarter of the survey participants estimate that their income in June 2020, compared to the same month last year, was at least halved, and every other company made a loss of up to 30 percent. One-fifth of the surveyed micro-enterprises estimate that their revenues in June this year are at least 70 percent lower than it was in the same month last year, while a third of companies of that size earned 30 to 50 percent less this June, compared to the same month in 2019.

Some businesses were better prepared for the emergency and were able to strengthen their existing online channels (as reported by 30 percent of all respondents), but most other firms also voiced their expectation that digital solutions will be required for recovery. One-third of all firms report planning to develop new digital advertising channels, digitalize their business processes, and/or adapt their product portfolios to new developments in demand. About 13 percent of those surveyed reported responding to the downturn by either setting up online stores or gearing up to do so. Companies integrated into global supply chains were much more likely to alter their production algorithms or introduce new products (as reported by 40 percent of these businesses).

Almost 60 percent of the companies organized the work of employees from home, and every other company reduced the number of working hours. As many as 20 percents of respondents increased the number of employees, and less than five percent laid off employees during the crisis. One-third of companies from the IT sector, food and beverage production, and agriculture increased the number of employees in the previous period.

The liquidity has been a crucial challenge for Serbian businesses, while difficulties are expected in settling obligations, especially for micro and small companies. Every other company expects problems with settling obligations in the next 30 to 90 days. In terms of liquidity, the vast majority of companies plan to commit to better cash flow management 72 percent, a significant number of companies plan to introduce customer risk assessment, and the plan is to stimulate demand through deferred payment, as well as negotiate with creditors on later debt repayment, use advance payments, and taking out liquidity loans through a development fund. Slightly less than a third of companies plan to borrow from the founders or take loans from commercial banks or use liquidity loans from commercial banks with a national guarantee scheme.

Half of the respondents, 52 percent, plan to develop a recovery plan. As many as 43% of companies decide for financial consulting and professional preparation for communication with banks.

The "Overcoming the Crisis Together” survey was conducted by the Serbian Chamber of Commerce and USAID's Cooperation for Growth Project in the three phases since the beginning of the state of the emergency caused by the coronavirus pandemic. 396 companies from Serbia, which according to official data together have more than 20,000 employees and generate 199 billion dinars of business revenues, participated in the final, third iteration of the survey.

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