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How much can the announced income increases compensate for price increases?

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The rise in the prices of basic necessities, energy and communal services in the past two years have seriously affected the standard of the population.

Although, according to official data, inflation calmed down in July and August, autumn is expected to bring new waves of price increases. Experts say that the Government’s anti-inflationary measures are indicators that the citizens of Serbia are in a difficult economic situation.

A new blow to inflation will follow partly due to the rise in oil and gas prices on the world market, but partly also a consequence of the Serbian government’s economic moves, experts explain.

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In November, the price of electricity will rise by 8 percent, gas by 10 percent, and the October increase in excise duty by 8 percent for petroleum products, coffee, cigarettes and alcohol could lead to price increases in the following period.

“The fact is that we pay for it all ourselves from the budget, that nothing is given away, because you see, on the one hand, the government gives you that money, like 100 euros, to those under 18, and then raises excise taxes on all citizens.

And then pays from that those 100 euros, and you will continue to pay those excise taxes this year and next year, and you will pay them forever, and once you got those 100 euros, and that’s only a part of the population. So when you look at it a little, you see that you are in some effect actually at a loss, not at a gain”, Aleksandar Milošević, editor of the economic column in the newspaper “Danas”, told Euronews Serbia.

Double-digit inflation and purchasing power

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Aleksa Dokić, a professor at the Faculty of Economics in Belgrade, points out that in times of high inflation, it is natural for citizens’ salaries to be higher, otherwise the population would face, as he says, a drastic drop in real purchasing power.

“On the one hand, you have a double-digit inflation rate, on the other hand, you first have a “lag”, a pause in the moment of reaction in terms of raising our wages in relation to the inflation itself. So there has already been a drastic drop in purchasing power. The question is in to what extent will all the announced increases and the real increases that are happening both in the private and public sector actually be able to compensate for the increase in prices in retail”, said Dokić.

The annual inflation rate in Serbia in September was 10.2 percent, but the President of Serbia, Aleksandar Vučić, announced that it will be in single digits by the end of the year, more precisely 8 percent.

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