“The crisis of state-owned enterprises threatens the Serbian economy” - World Bank calls for reforms to increase the efficiency of public finances
Serbia needs to address fiscal risks posed by its large state-owned enterprise sector to ensure long-term fiscal sustainability and unlock economic growth potential, the World Bank said.
According to the public finance review report, the country needs a reform strategy for state-owned enterprises, especially in the energy, infrastructure and transport sectors, including eliminating operational deficiencies and restoring financial discipline in the short and medium term.
“The performance and governance of state-owned enterprises have a direct impact not only on the efficiency of public services and the competitiveness of the economy, but also on the sustainability of public finances,” the World Bank said.
In 2023, the Serbian government owned 176 state-owned enterprises with 107,000 employees, about 4.5% of formal employment, dominating key sectors such as energy, transport and utilities. That same year, state-owned enterprises negatively impacted the government balance sheet by 0.7% of GDP, or almost a third of the total fiscal deficit, according to the report.
The World Bank noted that “chronic deficiencies” in state-owned enterprises, such as energy company EPS and gas importer Srbijagas, often require large subsidies to cover losses or keep prices low for social and political reasons. For example, in 2022, the government provided 1.4 billion euros to state-owned energy companies to offset the effects of the energy crisis.
Between 2015 and 2023, Serbia's state-owned enterprises recorded a total profit of 1.68 billion euros, with an average return on assets of only 0.7%. Persistent losses in many companies, dependence on budget support, and ineffective investment models highlight structural weaknesses in governance and organization.
According to the World Bank, this fiscal burden is mainly the result of strategic and operational problems, including the decline in production in the electricity sector, the lack of transparency in reporting loans provided by the budget to state-owned enterprises, and their increased dependence on external borrowing.
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