The growth of the share of the public debt of Serbia in the gross domestic product (GDP) of 4.8 percentage points to 56.8 percent in 2020, is twice lower than in the EU member states.
This is shown by analysis of the National Bank of Serbia (NBS).
“Very often we are faced with unjustified pessimism and unfounded statements of some economists and the work of the domestic professional public regarding the increase of Serbia’s public debt in 2020 and the sustainability of public finances in the coming period,” the NBS said in a statement.
The share of the central government’s public debt in GDP during 2020 increased by only 4.8 percentage points and was kept below the level prescribed by the Maastricht criteria, the central bank emphasizes.
The NBS points to the fact that the increase was much smaller than in other EU countries, among other things, due to the more favorable result of Serbia’s GDP growth, and that it was aimed at preserving the working and production capacities of our country and preserving business and consumer trust.
In that context, they point out that, in addition to financing the necessary health costs, the increase in public debt is the result of the decision of the Government of Serbia to provide assistance to the economy and the population in order to mitigate the economic effects of the pandemic.
“Thanks to the responsible economic policy in the previous period and full coordination of monetary and fiscal policy, the costs of government borrowing have been significantly reduced, while increasing the share of debt in dinars, which has significantly reduced currency risk,” the central bank said.
When analyzing data on public debt, the NBS notes, it is always necessary to emphasize that two categories are calculated and communicated – public debt of the central level of government and public debt of the general government, which includes other levels of government.
Both indicators ended the year below 60% of GDP. Central government public debt increased from 52 percent of GDP at the end of 2019 to 56.8 percent at the end of 2020, and when looking at the general government, the figures are slightly different. The general government public debt increased from 52.9 percent of GDP at the end of 2019 to 57.7 percent at the end of last year.
Compared to EU countries, in 2020, Serbia had, on average, more than twice the share of public debt in GDP.
In the European Union as a whole, as of the third quarter, the general government public debt increased by over 12 percent of GDP, from 77.6 percent at the end of 2019 to 89.8 percent of GDP. The increase in debt in Central European countries averages about 10 percent of GDP, in the most developed EU countries on average about 15 percent, while the public debt of Greece and Cyprus increased by over 20 percent of GDP, according to the NBS analysis.
They point out that the public often ignores or even misinterprets the fact that, despite a comprehensive package of economic measures, all economic indicators have remained within sustainable limits and that favorable prospects for stable economic growth in the medium term have been preserved.
According to the NBS, without the package of measures adopted, the fiscal part of which had to be partly financed by increasing public debt, Serbia’s GDP decline in 2020 would amount to over 6 percent, and a full recovery due to loss of production and human capacity would last from three to five years.
“Instead, Serbia recorded a reduction in GDP of only 1.1 percent in 2020 and will be one of the few countries that will exceed the pre-crisis level of economic activity in 2021. For comparison, after the previous crisis in 2009 and GDP decline in that year of 2.7 percent, the pre-crisis level of GDP was exceeded only in 2013 due to the loss of production capacity and labor,” the NBS analysis states.
Adopting a comprehensive aid package in the shortest possible time (total value of about 12.5 percent of GDP) and maintaining confidence during the most difficult months of the 2020 pandemic, turned out to be the key to rapid recovery of the most important sectors of the economy – industrial production, retail trade and merchandise exports.
“Having in mind the preserved stability and perspectives of our economy, the conclusion is that the increase in public debt was justified, but also moderate, having in mind the scale of the pandemic,” the NBS concludes, B92 reports.
