It is estimated that Serbia’s gross domestic product (GDP) will increase by 7% this year, making it one of the five or six most successful countries in Europe, although growth could be lower due to problems in the Electric Power Industry of Serbia (EPS), he said today Professor of the Faculty of Economics in Belgrade Milojko Arsić.
He said at the presentation of the publication “Quarterly Monitor” that unexpectedly good results were achieved in the first quarter of this year due to favorable relations between export and import prices of products, which is unusual and short-lived.
“It is certain that the fiscal deficit this year will be significantly smaller, not only according to the projection in the original budget which foresaw a deficit of seven percent of GDP, but also in relation to the rebalance which foresees a deficit of 4.9 percent of GDP.” said Arsic.
He added that “the fiscal deficit will probably be around four percent of GDP or less”, but that the value of public debt has increased by almost three billion euros this year, or by ten percent.
Arsic said that he estimates that the current account deficit this year will be slightly above four percent of GDP, but that due to the extraordinary import of energy, it could reach five percent of GDP.
According to him, the external debt increased significantly this year and amounted to 32.3 billion euros in June, and in the third quarter the state borrowed another 1.4 billion euros.
Inflation in November, he said, was 7.5 per cent and was the highest in eight years.
According to Aarsic, monetary policy in Serbia is still expansive, interest rates have not increased, but liquidity has been reduced in another way, and such monetary policy has been implemented by other central banks and it reflects the preference of governments and central banks to give greater importance to economic recovery. activities, rather than slowing inflation.
He pointed out that it is difficult to expect such a policy to continue next year.
Predictions of economic trends in the next year are uncertain because it depends on the policies that will be implemented in Serbia and the world, the US Federal Reserve (FED) has announced an increase in interest rates, the European Central Bank has not yet issued such a statement. while the Bank of England and the banks of Central Europe have already raised interest rates.
He said that there are high and geopolitical risks that have led to an increase in energy prices, although those prices will remain at a high level for most of next year, which will negatively affect the increase in GDP of countries that are highly dependent on imports. that group.
“It is already certain that the price of gas next year, when Serbia’s six-month agreement with Putin expires, will be higher, which will burden the economy,” Arsic said.
He assessed that in Serbia there are specific problems related to the work of public companies EPS, in Telecom due to high debt growth, and rising energy prices will certainly negatively affect the business of “Srbijagas” which will have to increase prices or make a loss. in the end, the state will have to take over.
He added that there are problems in the business of Air Serbia, so it is very possible that it will negatively affect the growth of the economy, but also public finances.
According to him, the estimate of economic growth of international institutions and the Government of Serbia for 4.522 in 2022 is quite reasonable, but there are risks for slower growth than that projection and they are higher than those of more significant growth.
If that projection is realized, as he said, employment growth would be two to three percent, but probably modest wage growth due to inflation, which will be at least five percent year-on-year, and possibly six percent, depending on the National Bank of Serbia and the World Bank. markets because much of it is “imported”.
“The growth of the external deficit is expected, which has been increasing since the second quarter of this year, and now amounts to five or six percent of GDP in the current balance of payments, and will probably be around six percent next year,” Arsic said.
He pointed out that it is certain that the public and foreign debt will be increased next year, but that it is now difficult to predict that increase due to numerous risk factors.
“According to the cumulative economic growth in 2020 and 2021, Serbia is in third place in Europe and 23rd in the world, and the above-average results were contributed by the structure of the economy, strong fiscal and monetary incentives and weak epidemiological measures,” Arsic said.
Evaluating the fiscal policy for 2022, Arsić said that the framework was set in an adequate way and that the focus should be on the efficiency of investments, from project selection to realization and quality determination, then on increasing the quality of education, health, state administration.
He added that support should be provided to research and innovation, and stressed that the progressiveness of taxation should be increased.
Asked whether the prices of several basic groceries should have been frozen, Arsić said that such a measure was unnecessary because it is applied when there are major disturbances on the market.
He said that the bad side of that measure is that the prices of energy are not frozen, so the producers will find themselves in “scissors”.
He added that the only good side of that measure is that it is expected to last relatively short, two months.