The measures of the Government of Serbia in the fight against the crisis caused by this world pandemic have given good results, especially in terms of employment, ie preventing the number of unemployed from increasing. In addition, the payment of a one-time aid of 100 euros was also a good move, says in an interview with Politika, Dr. Hasan Hanic, professor at the Belgrade Banking Academy.
Did the measures of the Government of Serbia in the fight against the crisis caused by the Covid 19 pandemic give good results?
In my opinion, the measures of the Government of Serbia in the fight against the crisis caused by this world pandemic have given good results, especially in terms of employment, that is, preventing the number of unemployed from increasing. The payment of three minimum wages was especially important, which in combination with other measures, such as favorable loans for working capital, the possibility for economic entities to defer the payment of taxes and contributions. Thanks to the measures that the government has taken so far and the structure of our economy, there are enough reasons to believe that the impact of the corona crisis will be relatively weaker in our country than in other economies in the region. If we take into account the fact that foreign investors have a relatively high degree of confidence in a stable environment in Serbia, then we can rightly say that compared to other countries in the region, we are a fast-growing economy, although the term “growing” should be understood conditionally when it is about this year, in which the volume of total production was reduced. With the arrival of new foreign investors, Serbia records an increase in the number of employees, which directly and indirectly generates new demand, ie consumption, which in turn pulls the economy forward.
The measure of the government, which refers to all citizens, and concerns the payment of one-time assistance in the amount of 100 euros, was also a good move, because if we have in mind the distribution of households according to the amount of monthly income, and especially the average pension, for many individuals, this amount represents 50-80 percent of their monthly income. It is certain that these funds are directed towards spending and that by the end of this year, these allocations will be returned to the budget, and that the state, in total, will absorb significantly more funds than that expenditure was.
The dinar exchange rate is more than stable at the moment, and that is certainly one of the indicators that the NBS is pursuing a responsible policy. Is this and how important for the economy?
A stable exchange rate is very important for realistic economic calculation, and it is also important for long-term cost projections and for evaluating the profitability of investment ventures. The course is a kind of indicator of the health and stability of the economy. It is especially important that in these, very unfavorable conditions, there was no weakening of the dinar, although the interventions in that area were relatively small. Low inflation and a stable exchange rate, in addition, signaled to domestic and foreign investors that the economic and business environment is very favorable. In that regard, I believe that the National Bank of Serbia is pursuing an adequate monetary policy and I am convinced that it will continue to do so in the future.
The National Bank has enabled the economy and citizens to freeze their loan installments on two occasions through a moratorium. Was this a good decision?
This is another anti-crisis measure that enabled the economy and citizens, thanks to the guidelines of the NBS, to freeze their obligations in a certain period. This measure, of course, was especially important for preserving the liquidity of companies and individuals who, under the influence of the crisis caused by the corona, registered a decline in production, turnover, business and financial or personal income. The moratorium as a measure has just been adopted to prevent a drop in liquidity, because if companies and we citizens do not have liquid funds, we do not have liquid funds to invest and settle due financial obligations, then there are real risks to slow production to procure the necessary resources, and this could jeopardize the continuity in the process of production and provision of services. As far as I know, similar measures have been taken by other central banks, which strengthens our conviction that this measure was a completely adequate response to the given conditions. This is supported by the fact that more than 80 percent of the economy and the population have accepted the option to freeze their obligations in a certain period.
In the previous period, there was a lot of talk, and it is still a burning topic, that the courts in Serbia are overwhelmed with lawsuits against banks for the collection of costs for loan processing. In your opinion, do banks have the right to charge fees?
The issue of lawsuits against banks for the collection of loan processing costs has escalated so much that it has become a systemic problem. It is interesting that in the middle of 2018, the Supreme Court of Cassation took a legal position on the permissibility of contracting loan costs, but that this position is interpreted differently, and the judgments are uneven. However, the fact is that the NBS, as a regulator of the financial sector, gives banks the opportunity to charge customers fees and other costs, provided that the contract provides them with a repayment plan and, individuals, an overview of essential elements of the loan, including this cost item. Based on that, it can be seen that fees and costs represent the same category and that banks have the right to calculate both items. The National Bank has repeatedly commented on this issue through the media. In this regard, a very instructive example is from the European Union, which we as a country aspire to, when the European Court of Justice in 2019 in a dispute between a client and a Hungarian bank, ruled in favor of the bank, and thus de facto expressed the European Community’s position on this issue.
There is indeed an unusual dualism in terms of different requirements for expressing the price structure of products sold by manufacturers or traders, ie the prices of services provided by service organizations and institutions, including services provided by lawyers, courts, notaries, colleges and other higher education institutions. , on the one hand, and the prices of banking products and services, on the other hand. When, for example, he buys a certain product in a retail facility, none of us asks the seller to break down the selling price to the purchase price of the goods, transport costs, product storage costs, etc., and the earnings that the retailer earns. In the case of banks, however, for some reason unknown to us, this is not the case, and it seems that only banks are obliged to show each item of costs, and from a number of cases of disputes resolved against banks, it would be said that their right is challenged to earn.
What is also interesting in this situation is that clients decide to file lawsuits for very small amounts, for which in some cases it is not worth even leaving the house, much less going to court. However, it is even more interesting that there is one link in the chain, one side that really has an account to encourage bank clients to sue and thus fill the courtrooms. These are lawyers who, after each dispute, receive a fee for drafting a lawsuit, for access to the hearing and the like, which is, as a rule, many times higher than the amount that is returned to the client.
So how do you see the solution to this problem?
I expect the Government of Serbia to soon form a working group to solve this problem, composed of representatives of relevant ministries, NBS, commercial banks and other relevant stakeholders, which would propose a model for more efficient solution of this, I would say, burning problem, given that the courts are overcrowded and according to some estimates, the number of lawsuits will rise to as many as 120,000 by the end of this year. The state should approach the resolution of this issue in a fast and convenient manner, taking care not to jeopardize the legal security and predictability of the legal framework of business for all economic entities, including banks.
What awaits us in the coming period?
There are certainly more challenges ahead of us. At the beginning of next year, the companies will start paying the tax that was deferred to them this year. The government can be expected to take new, additional measures, especially in terms of encouraging entrepreneurship, because it is an area that has great potential for creating new jobs, increasing production and achieving economic growth. In order to encourage domestic investors and entrepreneurs, it is important for the state to provide additional benefits in the form of subsidies and incentives for growth and development, especially underdeveloped areas, which are often bottlenecks for faster economic growth and development of Serbia. It is also necessary to provide investors, especially those who are export-oriented, with incentives regarding the exemption or reduction of income tax and the use of more favorable bank loans. In that regard, the role of the Development Agency of Serbia can be especially important, which, as a rule, provides more favorable conditions for loans intended for investments in investment ventures, Politika reports.
