The drop in gross domestic product (GDP) in Serbia in 2020 during the Covid-19 pandemic is 3.2 percent, said Vladimir Gligorov, an associate of the Vienna Institute for International Economic Studies.
He said in an interview with Betty that this is shown by the official preliminary data for the period of the pandemic that began in mid-March, after the first quarter of 2020.
“The smaller decline in GDP in Serbia compared to the decline in GDP in European countries is a consequence of the underdevelopment of the economy and a significant contribution of agriculture and industrial production in which durable consumer goods have a small share,” Gligorov said.
In addition, a significant contribution to GDP growth are, according to him, public spending and public investment, “which can be seen in the increase in wages.”
He added that the decline in market services is large and similar to that in developed countries, and that will limit Serbia’s recovery in 2021 and in the coming years.
“Economic growth should not be expected in the first quarter of 2021 because the epidemic will last, and also because the growth rate was high in the first quarter of 2020,” Gligorov said.
According to him, the situation on the labor market could worsen because the private sector will have to consolidate.
Investments, as he said, in 2020, if public investments are excluded, are significantly reduced and it is unlikely that this will change at the beginning of 2021, and how it will move later depends on the suppression of the pandemic.
“The problem will be the slow recovery of private investments. The original plan of fiscal consolidation was to encourage private investments, by reducing public spending, and if private investments, both domestic and foreign, do not recover, it will be a problem, not in the short term but in the long term,” Gligorov said.
He pointed out that interest rates are now low, so public debt is not a cause for concern, but when the recovery of more developed economies accelerates, the costs of borrowing for countries such as Serbia will increase and that will be a limiting factor for economic growth.
He said that the risk with a “fixed” exchange rate is that over time it becomes more expensive, first politically, and then economically, to give it up than to maintain it.
“It is quite clear from the Serbian experience. Now it is a problem that is being postponed because interest rates on foreign debts are small, and foreign trade is reduced. But it is a risk that is not necessary, and it will inevitably increase. The problem is not the exchange rate itself, but the monetary and exchange rate policy,” Gligorov said.
According to him, the state aid to the economy was in principle properly directed, but it is necessary to support the recovery of market services, and “that can already be seen at the airline”.
Asked whether small and medium-sized companies would be shut down, Gligorov said that “there is no doubt that sometime in June last year it was decided that it is acceptable to significantly infect more people and therefore increase mortality from the epidemic in order to achieve political and economic goals.”
“This, in turn, results in a prolonged crisis in the service sector because the impact of the epidemic will be prolonged,” Gligorov said.
Answering the question how he assesses the “reforms” of public companies, Gligorov said that “we have been watching this for half a century”.
“Changes in public companies aim to keep everything the same,” Gligorov said.
Asked whether Serbia has the economic strength to help Serbian minorities in the region, by financing the construction of infrastructure and various facilities, Gligorov said that “it is not unpopular”.
“The public obviously thinks that is justified. Would it be better to invest in something else, it would be. Isn’t a small part of that money thrown away, it is. But if the political public is not in opposition, that is the cost that is wanted,” Gligorov assessed, Danas reports.
