“If we had a good situation, we would not have an arrangement with the International Monetary Fund,” says Dejan Šoškić, a professor at the Faculty of Economics. It explains that the “standby arrangement” is in case of need and is intended for vulnerable economies. “We are vulnerable, because we have a high public debt, a deficit in the current part of the balance of payments that has started to grow. Which means that we have not reformed our economy. The main outcome of the reforms is to increase the competitiveness of the economy. If we had regulated the economy well, the arrangement would not have been needed,” said Šoškić.
Šoškić reminds that Serbia is dominantly dependent on the European Union, that our largest trade is with the EU.
“We are tied not only to what is happening in the environment, but also to the three engines of the European economy – Germany, Italy and France, Austria is also important for us. All those countries have the potential to go into recession, it will affect our country. There will be an additional slowdown in economic growth, we see that Serbia ends the year with 2.5 percent GDP growth, which is worse than our neighboring countries. Croatia has a significantly higher predicted growth rate, Slovenia the same. We have a growth rate that is among the lowest in the region, it is returning to a level that Serbia cannot exceed, which is between 2.5 and 3 percent”, said Soskic.
As he says, the main thing that affects the performance of the EU is the war in Ukraine and the introduction of sanctions on the economy, which is bigger than analysts say.
“If you have supply problems there, you have a tendency for inflation to rise, for the lack of repair materials and energy to lead to a drop in productivity.” Both the Russian and American economies are quite similar, they have a lot of resources, inhabitants, technological solutions, they are large economies that can be relatively independent. They are very capable of surviving without the rest of the world, to a large extent that is also China. Others, especially Europe, rely on imports, Europe imports energy, if it has to pay more for it and there is not enough of it, then it will affect its production at competitive prices,” explained the professor of the Faculty of Economics.
He states that recession is a normal occurrence in natural cycles.
“If you have a decline in economic activity for two quarters, it can be said that a recession has occurred.” Economic policy measures have no answer to stagflation, we can expect a decline in economic activity with inflation, all the elements are there,” he says.
“In Serbia, we will have a slightly higher inflation rate, I believe that it will stop further growth,” Šoškić added.
He also explains that when you have a price control measure, then the inflation measure is not completely realistic. The measure of inflation we have, he says, should reflect, on average, what people feel as a decline in purchasing power.
“If food prices rise faster, the poorest have a greater devaluation of their budgets, the fact that inflation is now more stable means that further acceleration of price growth will stop.” Some kind of stabilization is ahead of us, most countries, including us, use some combination of economic policies that is not logical. You have rising interest rates and rising wages from the budget, rising wages and pensions are at odds with restrictive monetary policy. The best way to fight inflation is not to go linearly with raising salaries and pensions, but to have a system of assessment and simply giving social assistance to the most vulnerable, that will be the fastest way to eliminate inflation,” says Professor Šoškić.
He explains that inflation is not the same for everyone, but that it depends on the structure of our consumption.
“The most vulnerable will spend the largest part of their income on food, and that is why it is important that we were in a position, and we were not, to protect the price of food to be low, and it is best protected by large production in agriculture,” he points out, N1 writes.