If Western investment in Serbia comes as a result of the crisis caused by the coronavirus pandemic, it could be replaced by those that would come from China, according to Miladin Kovacevic, director of the Bureau of Statistics.
Analyzing four packages of measures announced to mitigate the economic damage to the epidemic in the broadcast Sputnik, Kovacevic estimates that the burden of the crisis is shared between the state and the private sector.
The first package, reminds Kovacevic, is fiscal relaxation – delaying payment of taxes and contributions on wages and advances for income tax, as well as delaying payment of property taxes, which is an indiscriminate package that applies to the entire private sector.
The second package is direct assistance to small and medium-sized entrepreneurs in the form of three minimum wages for employees, while the third package refers to additional liquidity injections in the form of loans that can be provided by the Development Fund and guaranteed loans, as well as operations with possible corporate bonds.
The fourth package of measures, as Kovacevic puts it, is “helicopter money” of 100 euros for each citizen. He acknowledges that the package is “a little indiscriminate” because all adult citizens of Serbia will receive the same amount, regardless of their wealth and income, but points out that there is no time for a social selection mechanism at the moment when it has to respond quickly.
When it comes to the possibility of a spate of Western investment due to the global crisis threatened by the pandemic of Kovid 19, Kovacevic says that it will certainly happen, but that, although he does not want to be “optimistic without cover”, he would not be surprised that Chinese companies sending help today will not buy our corporative bonds tomorrow and take ownership of our businesses.
Radojko Nikolic, editor-in-chief of Econometer and Business Magazine, points out that around 900,000 people will be covered by the minimum payments, according to initial estimates, but believes that the problem is that the measures have not yet been operationalized and that it is not known exactly when are applicable.
“We’ll see how this all looks technically. Is 5.1 billion euros worth of money enough – yes, but with these measures it is delayed and the economy lives every day. March has passed in an epidemic, April will also pass, and what employers will do while they wait for the measures to be operationalized,” Nikolic said.
Nikolic sees as one of the problems that could be imposed months after the pandemic that Serbia has the largest economic cooperation in the EU with Germany and Italy, which are also affected by the virus, both health and economic.
“It is okay for us to repair what can be done at home, but the big question is how we will return to these markets and how we will continue to cooperate with them, as well as what will be the demand from them for what we produce,” says Radojko Nikolic and he adds that the big question is when will the full recovery of the economy come because such a crisis has not been seen so far.
Kovacevic notes that the lucky circumstance is that Serbia is an agricultural country and that it mostly has an industry that produces consumer goods, and for these goods, he says, there is a market in the surrounding area and beyond. The sectors where the crisis will be severe are services and tourism, where the state has yet to formulate aid measures.
Asked how the Pension and Disability Insurance Fund and the Health Fund would function if, due to delayed payment of contributions and taxes, money would not arrive, Kovacevic explains that the state has reserves but also the ability to borrow according to IMF and EU recommendations.
“The government has calculated that if our public debt is now about 48 percent of GDP and the Maastricht criteria are 60 percent, we still have 12 percent of the borrowing space in the current standards and before the crisis, which is approximately 5.5 billion euros. At the same time, the state has reserves of at least one and a half billion euros,” said Kovacevic.
Explaining the measures to support liquidity, Kovacevic said that two types of loans are envisaged and one will go through the Development Fund with a one percent interest rate where the application procedure will be established.
The bulk will be commercial loans, the guarantor of which will partly be the state, but it will be a commercial relationship between the bank and the client, he says and believes that this will avoid any politicization of the loan.
Summarizing the effects of the crisis on growth, Kovacevic recalls that in the first quarter Serbia achieved GDP growth of 4-4.2 percent, and expects the second quarter to be at the level of 1-1.5 percent.
“If the third quarter ends with a 2 percent growth it will be a huge success. In the fourth quarter growth could be 2-3 percent, so the whole year would be positive with growth of 1-2 percent. However, in the given circumstances, we cannot be dissatisfied and if this is zero, we expect that these measures will have significant effects,” estimates the Director of the Bureau of Statistics, Sputnik News reports.
