Due to the war in Ukraine, energy dependence in Serbia is worrying

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World Bank official in charge of Europe and Central Asia Asli Demirguch Kunt estimated today that the consequences of the war in Ukraine will cause an economic catastrophe in Ukraine and Russia, and will affect the Western Balkans, while in Serbia the energy dependence is the most worrying.

“The biggest concern is obviously energy dependence. Serbia relies entirely on Russia for natural gas supplies. However, there are storage capacities in Serbia and that should help mitigate the consequences of slowing down the flow of gas, “she told Voice of America (VoA). According to her, if the current situation lasts a long time or gets worse, then this has caused a jump in prices and could lead to industrial constraints and this is a cause for concern.

“In the long run, there are other challenges facing the Serbian economy to promote faster growth. This refers to potential delays in private investment. “Some of these concerns are related to the deterioration of the administration, the lack of infrastructure, the education sector that needs to be reformed because there are inconsistencies in what is being taught and the needs of the labor market,” the World Bank official said.

She said that if the increase in energy prices reflects on energy tariffs for households, which would disproportionately affect the poor, it is predicted that inflation will reach about seven percent in 2022, which is an increase compared to four percent in 2021.

Asli Demirguch Kunt added that the risk is related to what is happening with imports from Russia.

“If there is a complete ban, we could obviously see faster jumps in energy prices, which would then lead to rising inflation,” the official said.

According to her, it is estimated that the growth of inflation in Serbia in 2022 will be 3.2 percent, which is less than half the growth rate of 2021, and the war and sanctions will spill over to the economy through exports, foreign direct investment, remittances and revenues from tourism.

She added that her assessment was based on the assumption that “the war in Ukraine will continue in the near future, that sanctions against Russia will remain in force”, RTV Novi Pazar reports.