Salaries and pensions should not grow faster than inflation

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Professor of the Faculty of Economics and former governor of the National Bank of Serbia, Dejan Soskic, assessed today that salaries and pensions should not grow faster than the growth of inflation, and called the most important increases “hasty” and “politically popular”.

“I think that salaries and pensions should not grow faster than inflation.” “Eventually, they should be adjusted for some GDP growth or productivity, to find some equation,” Soskic told Insider TV.

According to him, it is necessary to take a conservative position in this period, because “regardless of the fact that public finances are currently stable, or so it seems, we have several potential challenges.”

“The first is that we do not know how the price of financing our public debt will move, so interest rates are going up, so we should strive for the public debt to be at a slightly lower level so that we can finance it regularly and without difficulties.” “On the other hand, it is not entirely clear how this situation around the crisis in Ukraine will unfold and what the consequences will be,” he said.Soskic added that because of that, Serbia would have to be careful because one of the possible consequences is the higher price of energy.

“I think it is good that we have looked for a way to provide cheaper energy in the coming period, if that is possible.” “I think we should keep as open as possible free trade communication with all countries in the world, because that will enable us to look for an alternative if prices start to rise somewhere,” Soskic pointed out.

Commenting on the growth of interest rates, he stressed that everyone should be careful – from those who have loans, through citizens who just want to take them, to the state because the growth of interest rates reflects the price the state pays when borrowing on international finance market.

Soskic added that there is reason for concern when it comes to the public debt of Serbia, which currently amounts to 31 billion euros, because the growth of interest rates is reflected in it as well.

“So, interest rates are now on a turning point, they have already gone up. “And when that increase starts, the same level of debt that we had yesterday becomes much more expensive for us today,” he said, Danas reports.