Inflation is not calming down, what awaits Serbia

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For now, Serbia does not feel the crisis, it has enough food and energy. However, it is uncertain how long the crisis in the world will last and how it will affect the economy. The projected growth of the gross domestic product for this year is four and a half percent, and with favorable forecasts, the International Monetary Fund estimates that the deficit and public debt could be higher than planned.

Adversity never goes away on its own, and so it is in economics. We came out of the pandemic stronger, but uncertainty awaited us due to rising prices and the crisis in the world, for which no one can predict how it will end. Expectations that inflation will calm down are slowly fading due to the situation in the Eurozone and the United States.

“The general price index is 8.8 percent in our country in February. In Europe it is 6.2. Food and beverages rose by some 15.2 percent compared to February last year. Transport has risen in price by some 13.3 percent “, states the director of the Bureau of Statistics, Miladin Kovacevic.

For businessmen, rising inflation is an important planning parameter, because rising prices threaten consumption and standards. This can affect the phenomenon of stagflation, where there is no growth of gross domestic product. That is why the stability of the dinar exchange rate is important, which the National Bank is keeping under control for now.

“Whether all this will affect the decline or increase of the social product is too early to say, it is only the first quarter. Depending on the global situation, we as a small country will have to bear some consequences of these macroeconomic movements, over which we have no influence”, says professor of the Belgrade Banking Academy Ismail Musabegović.

The Serbian Chamber of Commerce (SCC) believes that single-digit inflation should be maintained until the end of the year due to a psychological factor.

“When you have a long-term presence of inflation, and lower demand, it leads to a low growth rate, stagnation, and with the presence of increased costs, you can not reduce the input prices of raw materials, but you can save labor and it leads to to lower wage growth or layoffs, “said PKS financial analyst Bojan Stanic.

“Priorities for maintaining stability and mitigating the impact of external shocks”

The Serbian government has set up a working group to help companies renew their supply chain.

“We are in talks with the two largest Russian retail chains. Their activity and requirements for product placement have increased, which may indicate shortage of products on this market – household chemicals, personal care products, frozen fruits and vegetables, certain confectionery products and alcohol products “, says the director of the PKS Representative Office in Moscow, Dejan Delic.

Priorities are maintaining stability, mitigating the effects of external shocks and continuing reforms to maintain strong growth.

“The National Bank of Serbia has maintained stability for years, not only in the foreign exchange but in the entire financial market. In Serbia, we will take care to provide maximum favorable business conditions in the current global uncertainties and remain a guarantor of stability and peace,” said Jorgovanka Tabakovic.

Economists estimate that the fiscal deficit and public debt will be higher than planned this year due to increased spending, slower GDP growth, reduced excise taxes and expenditures on public companies. The mainstay is agriculture, because with higher production, exports can bring additional income and cover costs, Nova writes.