The assessment that the energy crisis could endanger economic growth was not made by some ominous economists, but by the president of the state, who, as we have witnessed, is optimistic when it comes to economic activities. News of rising gas, oil and electricity prices worldwide is simply racing with those of inflation.
Ljubodrag Savic, a professor at the Faculty of Economics in Belgrade, says that if energy prices remain at such a high level, there is no dilemma that not only our economic growth, but the entire world will be endangered.
“Since last year, when we were hit by the economic crisis caused by the pandemic, I believe that the world will find itself in a great crisis, and the reason is a huge increase in public debt. We had only a small respite when economic activity, after falling, recovered. And that break, not only in our country but also in the world, was not the result of a real recovery of the economy, but a huge pumping of money into the systems. All countries have increased the level of indebtedness, some have doubled. So we misunderstood that the recovery was real. Now we have to live what we are. Serbia can borrow twice more, we will have satisfactory growth rates, high employment, a relatively tolerable deficit, and the price will be high indebtedness,” Savic said.
He adds that the situation in the world is not at all rosy. One hundred ships are waiting to be loaded, because there are no port workers, there is oil in England, but there are no drivers. We have gas, and even when we have it, the price is 1,100 to 2,000 euros. So how is it possible, he asks, for gas to become so much more expensive with 300 euros, and does anyone think that it will not leave consequences on production costs. This will trigger inflation, because product prices have to go up. It is not possible for someone to produce their losses, because that simply does not make sense.
“It is good when there is a part of the world that is pulling, and others are dragging their feet, but now everyone has problems. In China, which was the engine of the world, factories work on the principle of even-odd, and that is because there is no gas,” states Savic.
Mihajlo Gajic, an economist of the Libertarian Club (Lübeck), says that the situation on the energy market may leave negative consequences, but predictions are that the growth of energy prices will last until spring at the latest and will then stabilize at a lower level. Due to this temporary nature, the energy crisis should not affect economic trends too much.
“Our exports may be affected due to rising costs, but as energy prices rise all over the world, our competitors’ costs are also rising, so exports should not be overly endangered. Especially because the price of electricity in our country is significantly lower than in the region and Europe,” notes Gajic.
He explains that energy prices have also increased for political reasons. European countries have built infrastructure for liquefied petroleum gas to reduce dependence on Russia, but America now exports that energy to China, so there is not enough for Europe. Therefore, without a political agreement with Russia, Europe will not have enough gas. It is a question of the functioning of the new gas pipeline “North Stream Two”, which was made, but is not used yet. When its use begins, and Gajic believes that it will happen relatively quickly, because Germany, which already has big problems because of that, insists on it the most, the price of gas will start to fall.
“Unfortunately, this is a question where the economy and politics intertwine, and then the economy loses the battle,” Gajic states.
He adds that the problem also arose because the production of electricity from wind was reduced in Europe, which had to be compensated by higher production of electricity from gas. That is why new quantities of gas had to be bought on the market, where there were not enough of them, which increased its price. However, the production of electricity from wind has started to return to normal, which can be seen by the amount produced in Denmark.
According to the agency news, the Czech Republic will give up the collection of VAT for electricity and gas on household bills in November and December, and will ask Brussels for permission to keep the zero rate in 2022 as well. The country appears to be gearing up for a longer energy crisis.
Gajic says that the mentioned move of the Czech Republic is contrary to the rules of the union, because it is foreseen that VAT must be paid on all goods sold, unless there was a VAT exemption before that, as was the case in food in Great Britain while was a member of the EU. He believes that the Czech Republic will have to repeal that decision and replace it with some kind of VAT refund, Politika reports.
