Serbia’s Growth Paradox: Small Businesses Drive Jobs but Struggle to Compete in Global Markets

Serbia’s SMEs drive employment and economic growth but face low productivity, financing barriers, skills shortages and slow digital adoption, limiting their global competitiveness. The OECD urges stronger policy implementation, targeted investment and international cooperation to help businesses expand, attract investors and accelerate economic development.

Serbia's small and medium-sized enterprises (SMEs) are the backbone of its economy, but low productivity, limited financing, skills shortages and slow technological adoption threaten their future growth. The Organisation for Economic Co-operation and Development (OECD), in its SME Policy Index for Western Balkans and Turkey 2026 – Economy Profile for Serbia, highlights the urgent need to turn business-friendly policies into measurable economic results. For the government, international development partners and private investors, the findings reveal both significant opportunities and structural challenges that could determine Serbia's long-term competitiveness.

SMEs account for 99.7% of Serbian businesses, employ approximately 1.15 million people and generate 53.7% of value added in the non-financial business sector. They provide 65.7% of employment but contribute only 33.5% of merchandise exports. This gap suggests that smaller companies remain heavily dependent on domestic markets, while larger enterprises dominate international trade.

Serbia's economy reached approximately EUR 83.3 billion in 2024, following cumulative real GDP growth of 18.4% between 2019 and 2024. However, economic expansion has not eliminated productivity differences between smaller domestic businesses and large enterprises. The report indicates that Serbia must strengthen its domestic business sector to sustain growth and improve living standards.

Small Businesses, Big Economy, but a Growing Productivity Gap

Serbia's biggest economic challenge is helping smaller businesses become more productive. Microenterprises represent approximately 90% of businesses but generate only around 14% of business value added.

Average labour productivity among microenterprises stands at approximately EUR 11,279 per employee, compared with EUR 31,435 in large companies. Overall, SME productivity reaches only 60.5% of large-enterprise levels.

These differences affect wages, profitability, investment and export competitiveness. Businesses producing less value per worker struggle to adopt modern technologies and expand internationally.

For the government, the priority should shift from simply encouraging new businesses toward helping existing companies grow. Investment incentives, technology grants, improved management practices and stronger connections with international manufacturers could help domestic suppliers move into higher-value industries.

Development partners could support supplier development programmes, particularly in manufacturing, digital services and export-oriented industries. Such initiatives should be measured through productivity improvements, export growth and sustainable employment.

The Financing Squeeze Holding Back Serbia's Entrepreneurs

Access to finance remains a serious obstacle. Approximately 21% of Serbian businesses identify financing as a significant constraint, compared with the Western Balkan average of 17%.

SMEs accounted for 31% of outstanding commercial bank loans, down from 36% in 2019. Meanwhile, banks control approximately 90.2% of financial-sector assets, leaving businesses with limited alternatives to traditional lending.

For entrepreneurs, this means fewer opportunities to finance machinery, technology, expansion and innovation.

The government could strengthen credit guarantee schemes, encourage venture capital investment and improve financial support for smaller enterprises. International financial institutions could provide risk-sharing facilities and affordable financing for businesses with strong growth potential.

Business restructuring also requires attention. Liquidation proceedings averaged approximately 57 months in 2024, creating uncertainty for investors and delaying the productive reuse of business assets.

Faster insolvency procedures and stronger financial institutions would help improve investor confidence while giving viable businesses better opportunities to recover.

Digital Skills and Green Investment: Serbia's Next Economic Test

Serbia has improved digital government services, but businesses are struggling to adopt advanced technologies.

Fewer than one-quarter of SMEs use advanced digital applications such as cloud systems or enterprise resource planning software, while customer relationship management adoption remains below 15%.

Environmental preparedness is another concern. Only 26% of surveyed SMEs have plans to reduce the environmental footprint of their digital technology use, while 47% have no such plans.

These weaknesses could become costly as European markets increasingly demand efficient production, environmental compliance and digitally connected suppliers.

Workforce shortages add further pressure. Adult participation in education and training stands at 5.5%, compared with 13.3% across the European Union. Only 43.4% of small businesses provide employee training.

For policymakers, investing in digital infrastructure without developing workforce capabilities would deliver limited benefits.

Development partners could finance combined digitalisation, energy-efficiency and workforce training programmes. Private companies could benefit from modern equipment, lower operating costs and improved access to international supply chains.

Turning Government Reforms into Real Business Growth

Serbia has made progress in simplifying business regulations. Its ePapir programme has simplified, digitalised or eliminated 762 administrative procedures, including 227 during 2024.

Public procurement also offers significant opportunities. Government procurement expenditure increased from 8.14% of GDP in 2019 to 10.87% in 2024, potentially creating a larger market for domestic suppliers.

However, transparent tendering, fair competition and easier participation for smaller businesses remain essential.

The OECD findings suggest that Serbia's next challenge is implementation rather than simply introducing additional policies.

Authorities should establish clear performance targets covering productivity, financing, exports, digital adoption and workforce development. International partners should coordinate investments around these priorities, while private companies should focus on innovation, skills and competitiveness.

Serbia's economic future will depend on whether its millions of entrepreneurs and workers can participate in a more productive, technology-driven and internationally connected economy. Without stronger implementation and targeted investment, the gap between small domestic businesses and larger competitors could continue to widen.