Over a fifth of Serbia's economic activity remains unregistered, representing 21.1% of GDP, or approximately €14.7bn, according to a recent study reported by Bloomberg Adria on June 19.

Despite a gradual decrease over the past decade, unregistered economic activities continue to have a significant impact on the country's financial landscape. The state’s approach to consumption tax collection has significantly influenced these trends.

The study, "Assessment of the Height and Dynamics of the Grey Economy in Serbia", conducted by professors from the Faculty of Economics in Belgrade, reveals a fluctuating trend in the grey economy. From 2009 to 2023, the grey economy averaged 23.6% of GDP, peaking at 29.1% in 2013 and hitting a low of 17.9% in 2021.

Recent years have seen a resurgence in the grey economy, but it remains a third smaller in the consumption domain in 2023 compared to its peak in 2013. In the income domain, unreported earnings comprised about 6.8% of GDP, or €4.7bn, in 2023. This figure represents one of the lowest levels in the past fifteen years.

The growth of the shadow economy until 2013 was the result of the state's leniency during the economic crisis and subsequent political changes, alongside inefficiencies in tax collection systems. However, post-2013, the implementation of digitalised inspection systems, penal policy reforms, and labour market flexibility led to a noticeable decline in unregistered activities.

Despite these improvements, the persistence of the grey economy poses challenges to public finances and equitable business conditions. The report underscores the need for further strengthening the capacity and efficiency of inspection services. Reducing the fiscal burden, regulatory reforms, encouraging cashless transactions, and boosting tax morale would further suppress the grey economy.