The deficit in the coffers in seven months is almost close to the one that is planned for the whole year, so the budget must be adjusted again.
The mission of the International Monetary Fund (IMF) will start its online visit to Serbia on October 5 for another revision of the current arrangement popularly called “guard house”, and it is quite certain that the topic of conversation will be the budget for 2021, but also the state treasury rebalance.
Experts point out that a new budget cut, after the one at the end of April, is inevitable due to a completely changed structure of revenues and expenditures. This will be the second rebalance this year, and the reason is a different economic reality as a consequence of the corona virus. According to the last published data of the Ministry of Finance from the beginning of September, in the first seven months of 2020, the deficit of the republic budget in the amount of 2.69 billion euros was realized.
As a reminder, the rebalance from April foresaw that the deficit of the republic treasury would be 2.90 billion euros, ie 6.9 percent of the gross domestic product (GDP). As the deficit in the coffers in seven months has almost approached the one that is planned for the whole year, it is clear that the budget must be redesigned. In other words, budget positions must be reconciled.
How is it that the deficit of the mentioned three billion euros, which was predicted for the whole year, was made in seven to eight months?
Milojko Arsic, a professor at the Faculty of Economics in Belgrade, explains that the money was spent on additional state aid programs for the economy, which were not in the first rebalance: on the payment of two additional minimums, help to hoteliers, help to newly established companies.
The rebalance must probably count on covering losses and paying loans for “Air Serbia”. As a reminder, the Fiscal Council warned that “Air Serbia” informed the creditors in May that it would not be able to repay the principal of the debt that matures in September of around 40 million euros. This cost could potentially fall on the state budget, along with the estimated loss this company suffered due to the pandemic (about 60 million euros).
Although the budget for next year is planned with many unknowns in terms of the recovery of the world and our economy, not everything is so black. Arsic points out that the European economy is recovering better than expected. In July, their industrial production was only two percent lower than in 2019, and news is coming that the German economy, the strongest European, is recovering faster than expected. All this indicates that the economic recovery will be in the form of the Latin letter V, meaning fast, and not in the form of the letter U, which means with delay, slowed down. Data on economic activity in Serbia for June and July are also encouraging.
As for the budget for 2021, talks will be held on well-known topics: increasing salaries in the public sector, increasing pensions, the realization of public investments, as well as on helping the economy to be in line with budgetary possibilities, as stated in the previous revision of the current arrangement.
– The main fiscal determinants of the budget for next year are not yet known. The only thing known is a certain increase in pensions by 5.9 percent according to the Swiss formula. This increase in pensions is due to the high growth of wages from the previous period, from November of the previous year, and it is a transferred effect. Salaries were increased in both the public and private sectors as a result of the shortage of certain occupations and remained at that level, because there was no reduction – says this expert.
In his opinion, salaries in the public sector should not be increased at the beginning of next year, but later in the year if the conditions for that are met. The budget should not start with large expenditures because there is still uncertainty about the epidemiological situation and there are risks in the world economy, so it is more reasonable to make a strategy for an unfavorable scenario. One should not play the card of luck, this economist believes.
Back in July, the Ministry of Finance published instructions for the preparation of the budget for 2021, according to which budget users had to send their plans by September 1. It states that the Ministry of Finance predicts real GDP growth of six percent and inflation of 1.8 percent, which means that nominal GDP growth is 8.8 percent.
– Similar to the entire world economy, Serbia is also facing risks and uncertainties due to the Covid 19 epidemic and economic sectors. As a consequence of such circumstances, a real decline in economic activity in 2020 of 1.8 percent is expected – the instructions state, Politika reports.
