The Fiscal Council of Serbia has expressed concerns over the government’s revised Fiscal Strategy for 2025, which includes projections for the next three years. The Council pointed out that an increase in the budget deficit was not necessary, particularly as it is primarily driven by increased current spending, rather than capital investments or structural reforms.
In its assessment of the government’s revised fiscal strategy, the Council noted that the new plan increases the budget deficit to 3% of GDP in the short term, a move it argued was avoidable. While the Council acknowledged some inevitable increases, such as pension spending, it highlighted that other spending increases lacked adequate justification. Public investments, including the purchase of Rafale fighter jets, which were not initially accounted for in the strategy, were cited as a major contributing factor.
Despite the rise in expenditures, the Fiscal Council noted that the increase in pension costs and public investments (around 1% of GDP) was largely offset by a corresponding rise in public revenues, leaving the overall fiscal deficit higher than initially projected. However, the Council emphasized that the larger increase in overall public expenditures—especially in areas not adequately explained in the revised strategy—was the primary factor contributing to the larger fiscal deficit.
The Council expressed disappointment that the government missed the opportunity to reduce Serbia’s public debt below 45% of GDP earlier through more conservative fiscal planning. The Fiscal Council also warned that introducing fiscal rules for the deficit might now be delayed until 2029.
While the Council acknowledged that a lower fiscal deficit would have been preferable and more economically viable, they stated that Serbia’s macroeconomic stability should not be at risk under the current revised strategy. The new projections indicate that Serbia’s public debt as a percentage of GDP will decline slightly, with the possibility of a more significant reduction.
The Fiscal Council also raised concerns about the government’s approach to fiscal policy, particularly its frequent adjustments and lack of long-term planning. They pointed out the government’s tendency to introduce new policies “on the fly” without proper inclusion in the broader fiscal strategy.
One significant concern raised by the Council was the lack of support for the Republic Institute of Statistics, which is crucial for effective management and accurate public policy planning. The Council suggested that the government should strengthen the institute’s professional and operational capabilities to ensure better decision-making.
The revised GDP estimate for Serbia in 2024 now stands at €82 billion, a significant increase from the previous estimate of €76.4 billion. This is the third major revision of Serbia’s GDP in the past decade, and the Council noted that such revisions are uncommon in other European countries.
In addition, the revised fiscal strategy includes a more detailed overview of large investment projects from the national budget, with 66 capital projects worth over €20 million each now listed, along with their estimated costs and timelines. This is seen as a positive step toward greater transparency in government investment projects, although the Council pointed out several omissions in the published data. Notably, the construction of some major infrastructure projects, such as the Bački Breg-Kikinda highway and the Belgrade subway, were either incomplete or absent from the list.
Despite these concerns, the Council acknowledged the improved transparency of the revised strategy, but urged the government to address the shortcomings in its reporting to further enhance accountability and fiscal discipline.
