The gray economy in Serbia saw a decrease from 2009 to 2012, followed by a period of growth from 2012 to 2016. However, it has been on the decline again since 2016, with the latest estimates showing a significant reduction, according to Saša Ranđelović, a professor at the Faculty of Economics in Belgrade, as reported in Danas.
Ranđelović, presenting his study “Gray Economy in Serbia – Empirical Assessments and Policy Recommendations” at a scientific conference in SAN, revealed that, on average, the gray economy in Serbia from 2009 to 2023 has represented 23.6% of GDP. The highest share of the gray economy was recorded in 2013, at 29.1% of GDP, while the lowest share occurred in 2021, with 17.9% of GDP.
In 2023, the gray economy accounted for 21.1% of GDP, according to the macroeconomic method, which translates to a tax gap of around 8% of GDP, or approximately 6 billion euros.
Ranđelović categorized the sources of the gray economy into two main types: income-related and consumption-related gray economies. He estimated that income-related activities make up about one-third, while consumption-related activities account for two-thirds of the total shadow economy.
Regarding income, in 2023, the gray economy of income was valued at 6.8% of GDP, or about 4.7 billion euros. Around 14.4% of total income was undeclared, a decrease from the 20% recorded in 2016. Notably, more than one-third of income from self-employment remains unreported, while about 10% of wages are also undeclared. Wages, however, remain the dominant source of income in the country, accounting for two-thirds of total income.
The decline in unreported income correlates with a drop in unemployment, indicating that workers now have stronger bargaining power in determining their working conditions.
As for consumption, the gray economy has fluctuated, reaching as high as 22.5% of GDP in 2013, and falling to 13.5% in 2021. In 2023, it was estimated at 14.4% of GDP, or approximately 10 billion euros, with over 15% of taxable consumption remaining unregistered.
Despite these improvements, the gray economy in Serbia remains substantial both absolutely and relative to the economy. Ranđelović emphasized that further reduction requires stronger tax control and collection systems, improved capacities for prosecutors and courts, as well as a reduction in the cost of doing business legally. Additionally, lowering the tax burden and enhancing tax morale through better public services, reducing corruption, and improving transparency and fairness in public finance are necessary steps for further progress.
