Economists believe that delaying tax liabilities to businesses due to the pandemic of the coronary virus could be conditional on firms retaining employees at pre-epidemic levels.
To mitigate the economic impact on the economy, government measures should focus on the economy and the citizens most affected by the epidemic, according to the authors of the latest issue of the Quarterly Monitor, published by the Faculty of Economics in Belgrade and the Foundation for the Development of Economic Science (FREN).
“The granting of temporary tax breaks and exemptions for businesses in epidemic-affected industries, such as hotel and freight and passenger transportation businesses, would help these businesses overcome the liquidity problem by the time the economy recovers”, the statement said.
Such benefits could, they believe, include exemption from property taxes for the duration of the hospitality industry epidemic, deferral of payroll taxes and social security contributions for employees who did not work during the epidemic.
The state could, they added, form a fund from which it would grant emergency social assistance to workers who, due to the epidemic, stopped coming to work.
When it comes to economic forecasts, they believe that should the Corona virus epidemic end in the first half of the year, they expect the country’s GDP could grow about two percent year-over-year instead of the planned four percent. The annual growth of two percent, they believe, would be the result of a slowdown in the economy in the first quarter, a sharp decline in the second quarter and a relatively strong recovery in the second half of this year.
According to the statement, the authors of this issue believe that, although the negative impact of the epidemic on the Serbian economy is quite certain, the magnitude of the negative impact cannot be estimated reliably.
The reason for this, they say, is that the key characteristics of the epidemic are uncertain, that is, the unknown duration of its duration, the total number of people who will be infected in Serbia and its key economic partners and the number of people who will be quarantined.
They also state, for now, only partially known measures that will be taken in Serbia and the countries of our major economic partners to mitigate the effects of the epidemic on the economy.
Slower GDP growth but also a decline in domestic demand and a deterioration in taxpayer liquidity will result in an automatic fall in tax revenues and a fiscal deficit growth of about 1.5 percent of GDP, the statement said.
“The fiscal deficit will further increase because of costs directly targeted at combating the epidemic (rising health care costs, security services…) and the implementation of measures to mitigate the negative effects of the epidemic on the economy.”
The epidemic, in their estimation, could have the effect of slowing down the realization of public investments due to illness of workers, introduction of quarantine, inability to procure certain inputs, so the state expenditures on this basis could be lower than planned.
“Considering all the factors that affect taxes and spending, we estimate that the fiscal deficit in 2020 could amount to 2-2.5 percent of GDP”, the statement said.
If the epidemic were to continue throughout 2020, the negative effects on the economy would be, they say, even stronger, and Serbia’s economy would, in that scenario, enter a recession.
They consider that an important question is how long the consequences of the epidemic on the economy of Serbia and other countries will be.
“Assuming that the epidemic will end this year, the epidemic’s negative impact on the economy would be short-lived, meaning it would end soon after the epidemic ended”, economists said.
The Serbian economy would, in the coming year, largely recover from the negative effects of the epidemic, with a relatively high growth rate.
The impact of the epidemic on the economy is similar, they say, to the impact of other natural disasters such as major floods or droughts, which cause a major economic downturn in the year in which they occur, but already in the coming year, a strong recovery follows, Kamatica reports.
