Diagnosing growth constraints in south-eastern Europe: The case of Serbia

We use a growth diagnostic approach to analyse the main impediments to investment and growth in Serbia. We look at a wide set of quantitative and qualitative indicators to understand if businesses are constrained by access to finance or if they forgo investment opportunities because they cannot reap the full benefits of their investment. Our analysis indicates that, while businesses still face challenges with respect to access to finance – particularly non-banking finance such as venture capital for high risk entrepreneurial investments – the binding constraints to growth in Serbia currently lie predominantly in the category of micro risks resulting from government failures. We find that weak competition, a burdensome tax administration, restrictive labour regulations, a high labour tax burden and pervasive corruption represent the main impediments to investment in Serbia today.