The Serbian economy is stable, “floating,” and yielding results, according to experts in a special broadcast on Radio Belgrade 1, “Economy in 2023,” aired yesterday.
In response to questions about how the Serbian economy is facing numerous challenges brought by this year – price hikes, inflation, geopolitical circumstances, the economic results at the year’s end, expectations for the following year, the implications of the precautionary arrangement with the IMF for our economy and citizens, whether the Serbian economy is on a growth trajectory, and the citizens’ standard of living, the responses came from Professor at the Faculty of Economics and a member of the World Academy of Sciences and Arts, Dragan Djuricin, special advisor to the Fiscal Council, Slobodan Minic, and Professor Milan Nedeljkovic, Dean of the Faculty of Economics, Finance, and Administration.
Đuričin emphasized that the Serbian economy is above water, achieving economic growth and an increase in employment.
“Macroeconomic fundamentals are improving, primarily driven by exports. The stability of the exchange rate is not a consequence of this policy; it is a prerequisite for this policy,” evaluated Đuričin.
He added that with these results, along with absolute and relative growth in wages and pensions, alongside the growth rate and maintaining the debt at a level similar to before, coupled with macro and microeconomic liquidity, it can be said that “the ship is still being kept above water.”
As emphasized, praise from the IMF holds significant weight for Serbia due to the cost of capital and concerning the repayment of the country’s external debt, as well as the cost of capital in the domestic economy.
“Serbia has a solid rating, on the verge of an investment grade, which is a fantastic result. The role of the IMF in maintaining the credibility of our economy is extremely important in the eyes of foreign investors. They absorb the largest part of the risk, thus reducing the cost of capital,” stated Đuričin. He added that the relationship between the IMF and Serbia changed after December 2014, when a fiscal consolidation program for Serbia was supported at the annual meetings of the IMF and the World Bank, based on reducing wages and pensions in the first phase after restructuring the public sector.
As emphasized, from that time until now, Serbia has maintained a consistently good relationship with these institutions, implemented reforms, upheld performance, and maintained the same investment rating globally.
“For an economy that is on the rise and started from a low point, maintaining the country’s credit rating as a non-EU member, outside major regional associations, is a very important result, and the relationship maintained with these institutions is extremely important,” conveyed Đuričin.
He explained that the IMF primarily monitors the liquidity of creditors, pointing out that Serbian foreign reserves have increased, indicating an increase in the savings of both the state and the population, and that safety buffers exist within our economic system.
“We have a high level of security that debts will be repaid. The government leads the strategy and budget policy. The essence of change occurred when it was realized that the level of investment in GDP must be higher and that this increase in investment must come through an increase in so-called structural policies and the impact of investments enforced by the state, creating an environment and vertical structural policies for foreign direct investment entry,” explained the professor.
In line with the Faculty of Economics professor is the Dean of the Faculty of Economics, Finance, and Administration, Milan Nedeljković, who highlighted that the Serbian economy is “navigating in a sea with a lot of waves.”
“Nedeljković pointed out that results have been achieved in terms of GDP growth, with a developmental trend and export of services related to the IT sector, cautioning against inflation as the current most significant economic problem.
He assessed that Serbia’s agreement with the IMF implies continuous monitoring by the fund, meaning that the criteria set in the program have been met.
“Our relationship with the IMF is necessary; it allows us to achieve better recognition among foreign investors, reducing capital costs for us. We are now one level below the investment grade, which implies financial stability over a longer period,” explained Nedeljković.
Anticipating a slowdown in inflation next year, he estimates that it will not exceed the projections of the National Bank of Serbia of three percent plus/minus 1.5.
Slobodan Minić, a special advisor to the Fiscal Council, regarded inflation as this year’s most significant problem.
“Last year’s economic growth was low, but this year, the recovery has begun. There are visible occurrences that are relatively optimistic, the same applies to foreign trade movements. Fiscal policy and fiscal movements have been better than expected due to improved revenue collection. This year, the deficit will be around two percent, whereas the rebalancing predicted 2.8 percent,” stated Minić.
He assessed that Serbia is “relatively in order.” As emphasized, the government has learned that a low deficit is crucial for public finances.”
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