How did the Serbian economy handle the pandemic and what are the projections for the second half of the year

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The director of the Republic Bureau of Statistics, Miladin Kovacevic, said that a strong jump took place in April, which was not expected, and that Serbia was special last year compared to the countries in the immediate vicinity. He added that the measures of the financial assistance of the Government will cause a budget deficit which is foreseen and which will not be seen next year.
Industrial production in April is higher by 33.9 percent in relation to April 2020, and in relation to the average in 2020 by 5.8 percent. Director of the Republic Bureau of Statistics Miladin Kovacevic said that industrial production increased by 10.1 percent from January to April compared to the same period last year, and that the processing industry, which, as he stated, is a real signal of production growth, increased by 10.9 percent.
“There was a jump in April that, we can say, we did not expect. Of course we expected a recovery, we expected growth. We had a good first quarter, but that April jump was very strong,” said Miladin Kovacevic.
He added that in the world economy and in developed countries, economic growth was like the Latin letter “V”, but that Serbia is very characteristic in that respect, in relation to the immediate environment, and that there are three reasons why we ended the pandemic year well and with growth in the first quarter of this year.
“The first reason is the transferred effect of one growth cycle that started in 2015, accelerated in the second half of 2019, so we had the first quarter of 2020 somewhere with growth over 5.1, 5.1, 5.2 percent and that has its effect further to the rate of decline, ie the rate of growth in 2020 and now in 2021, when we return to pre-pandemic levels of production, when it comes to industry and other activities,” said Kovacevic.
He added that the second reason was the packages of measures to help the fiscal authorities, which, as he assessed, had a positive effect on the trend of rapid recovery after the end of the pandemic, while the third reason was the structure of the economy.
“Industry is the driver, it is the main sector that pushes GDP. In the first quarter, it ended with 1.7, although the initial estimate was 1.2, and before that our projections were even -1.3. These are projections that we had at the end of last year, but here we see that the recovery is much faster than we expected and we expect that growth will continue this year and will end with a growth rate of six percent,” said Miladin Kovacevic.
Kovacevic assessed the announcement of Prime Minister Ana Brnabic that the minimum GDP growth will be six percent this year and that, if calculated according to the Swiss formula, pensions will grow by five percent from January 1, 2022, as a good forecast.
Six percent growth is very realistic
According to a World Bank report, Serbia is projected to grow by five percent. Miladin Kovacevic stated that both the World Bank and the IMF are very conservative, especially during the pandemic, and that the growth of six percent is very realistic.
Kovacevic stated that the planned assistance for the unemployed will lead to a budget deficit, which is planned and which will amount to about seven percent.
“That deficit of public finances will not take place next year. Consolidation will take place, and it was planned for this year by the budget plan adopted in December last year, so that budget plan had a deficit of three percent, and now is seven percent. The reason for that is the package of measures that is planned due to the continuation of the pandemic,” Miladin Kovacevic emphasized.
He emphasized that these are stimulating measures recommended by the IMF, and that they have been applied in developed countries and in newly growing economies, including Serbia.
Speaking about the slight increase in the number of unemployed in the European Union, Miladin Kovacevic stated that there has been a decrease in the number of employees or an increase in underemployment everywhere, when people work shorter than the planned working hours.
“We now have grounds to expect the continuation of that recovery and growth and, of course, consolidation. In the coming period, what appears to be a challenge for us are some structural reforms and reforms of the institutional system,” Kovacevic said.
He singled out the continuation of consolidation and reform of public companies as reforms, which the IMF and the European Commission warn us about in the latest report, as well as energy reforms and measures to accelerate growth and create an ever-improving environment, RTS reports.