Serbia will need to borrow €5.8bn in 2015 (€3.8bn should be borrowed at home, mostly in dinars) to pay for its financing needs and
this will be achieved despite very low credit ratings. There is a plan
to borrow €1.5bn on international markets, but depending of how
successful the privatization process will be, Serbia might borrow
less than planned. Another €500m is expected to be borrowed
from the World Bank. A 36-month stand-by arrangement worth
€1bn will be discussed with the IMF in Feb 2015. This should help
Serbia stabilize its currency and help access to international capital
markets at lower rates, but it also means fiscal austerity and lower
domestic demand. The austerity-focused 2015 state budget was
already praised by the IMF as fully in line with previously agreed
policies between the IMF and Serbia. Austerity could actually increase public debt as it pushes tax revenues down. Foreign exchange reserves fell to €9.9bn (down from €10.9bn three months
ago), mostly due to reduction of banks’ (FX) reserve requirements
ratios and debt repayments. Net reserves are lower (as in other
countries) once bank reserve requirements and IMF drawings are
excluded – net reserves are 7.7bn.
BUSINESS ISSUES
In our December 2014 survey, 29% of companies reported downtrading to cheaper brands (the 6th worst score in CEE, but slightly
less than 34% six months ago). 14% of companies reported problems with collecting receivables (10th worst in CEE, but much better than 32% six months ago). In 2015, 7% of companies plan to
cut headcount (slightly up from 5% in 2014). 10% of firms plan to
cut sales/marketing expenditures in 2015 (same as in 2014). 17%
of companies plan to change the route-to-market this year, which
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is slightly less than 22% six months ago, but it is still the 4th worst
result in CEE, below Russia, Albania and Ukraine – this indicates
that pressures on business will remain.
CORPORATE SALES AND PROFIT TRENDS,
2012-2015
In terms of top-line growth in 2012, Serbia was the 6th worst in CEE
with just 55% of companies recording revenue growth. In 2013, only
57% of multinationals had revenue growth, which was only a small
improvement vs. 2012, despite 2.5% real GDP growth (mainly driven
by Fiat exports and agriculture), while only 47% of companies grew
profits vs. 53% in 2012. 2014 was somewhat better for business –
74% and 64% of companies had revenue and profit growth in 2014
respectively, while others either declined or stagnated.
According to our December 2014 corporate survey, Serbia ranks
at No 9 in terms of revenue growth forecast for 2015, better than
Croatia, Slovenia and Bosnia, but it ranks at No 15 in terms of profit
growth forecast in 2015, still better than Croatia and Bosnia. 74%
of multinationals expect revenue growth in 2015 (15% in double
digits). 79% expect profit growth this year, mostly in single digits.
Others predominantly expect to stagnate.
Corporate budgets should count on 2015 recession and lack of domestic demand and that is why a downward revision on corporate
expectations by mid-2015 seems quite possible.
Nenad Pacek,
President and Founder, GSA Global Success Advisors GmbH;
Co-founder, CEEMEA Business Group
Quarterly update – January 2015
15