In recent years, inflation in Serbia has largely eroded the growth in wages, meaning there has been no significant real increase in citizens’ purchasing power, according to Dejan Šoškić, a professor at the Faculty of Economics in Belgrade and former governor of the National Bank of Serbia. Speaking to Insider, Šoškić emphasized that, despite the reported wage increases, inflation has mostly negated any potential improvement in living standards.
Šoškić highlighted that Serbia has borrowed more than 14 billion euros in just the past four years, but he believes the key issue isn’t the amount of public debt, but rather the government’s selection of public investments. The Serbian Parliament is set to consider the 2025 Budget Draft tomorrow, which proposes income increases for pensioners, public sector employees, and minimum wage workers. However, when asked about the real impact of these wage increases considering inflation and the rising cost of living, Šoškić noted that the situation is clear-cut.
“If wages can rise faster than the official inflation rate, especially in areas that affect citizens’ direct consumption, we may see some actual increase in purchasing power. However, in recent years, the relationship between wages and inflation has largely resulted in inflation eroding nominal wage growth, leading to no real improvement in purchasing power. Despite efforts to boost living standards, these measures typically do not lead to genuine progress but create unstable macroeconomic conditions by fueling additional inflation. The real growth of living standards depends on productivity and competitiveness, which, unfortunately, are lacking in Serbia,” said Šoškić.
One of the major budget items receiving attention is the EXPO and the construction of a national stadium. Šoškić described these investments as wasteful. He pointed out that, based on similar global projects, Serbia likely does not need such endeavors. He believes that the funds would be better allocated to more pressing priorities, such as infrastructure, education, and healthcare.
“Based on publicly available data on similar projects globally, I seriously doubt that Serbia needs such projects at all. It seems like a waste of public funds, which will ultimately result in large, impractical buildings, serving as monuments to irresponsible government spending. Our country has far more serious investment priorities. These projects are just a series of problematic decisions that don’t contribute to revitalizing the country or moving towards stability. Instead, they lead to more inflationary pressures and divert attention from long-term growth strategies,” Šoškić concluded.
