At the time of the energy crisis and in a situation when inflation and interest rates are rising, the best advice that the International Monetary Fund (IMF) can offer to all countries, including Serbia, is to continue to “tighten the belt” and fill the fiscal “reservoirs” , she said today at At the Belgrade Economic Forum, the head of the IMF’s Belgrade office, Julija Ustjugova, who, together with the participants of the “Strategies for financing economic growth” panel, discussed how to consolidate state finances and not jeopardize economic growth.
Ustyugova reminded of IMF forecasts that the GDP growth of developed European countries will fall from 3.2 percent this year to 0.6 percent in 2023, as well as that many members of the EU and the Eurozone will face recession.
“A sharp decline is also expected in developing countries, from an average of 4.6 percent this year to below two percent in 2023.” That is why we expect that the economic growth of Serbia next year will be lower than in 2022,” said Ustjugova, but she also emphasized that the IMF, when it comes to fiscal policy, advises further “belt tightening”.
” How to implement fiscal consolidation, while still supporting economic growth?” The answer lies in the careful selection of capital investments . Discussions are underway on the new budget of Serbia, which plans 6.8 percent of GDP for these purposes. On average, capital investments in OECD countries amount to three to four percent of GDP. Therefore, the Serbian allocation of funds is solid, but what is important is to choose the right priorities on which that money will be spent,” Ustyugova stressed.
According to her, when choosing projects, one should not only keep in mind the provision of growth in the short term, but should support those that will attract private investments, and she cited energy security as an example of such investments.
“We believe that fiscal policy has an important role when it comes to mitigating the crisis of the rising cost of living, but it must be done in a more efficient way, by refraining from measures that are too broadly focused, which are unsustainable, expensive and support the growth of inflation,” she pointed out. Ustyugov.
She stated that the executive board of the International Monetary Fund will make a decision on concluding a stand-by arrangement with Serbia worth 2.4 billion euros on December 19.
“The philosophy of the arrangement is in accordance with the advice of the IMF, which reads – build ‘buffers’ and continue with belt tightening,” said Ustyugova.
The President of the Council of Governors, Nebojša Savić, also participated in the panel “Strategies for financing economic growth”, who believes that it is crucial for Serbia at this stage of development to increase productivity.
“Our strategy should be such that we go for investments that bring as much added value as possible.” If we are significant producers of plums and raspberries, why don’t we have processing? So, I think we should invest in high-quality food processing, the IT sector and the ‘green economy’. Digital and green – that’s what we should be dealing with,” concluded Savić.
The member of the Fiscal Council, Nikola Altiparmakov, assessed that it is possible to continue with large public spending on investments, and not endanger the stability of the budget, but that this requires a responsible approach.
” One of the messages of the Fiscal Council is to pay more attention to the structure of public investments. Therefore, we have to assess whether 200 million euros or 400 to 500 million euros should be spent on environmental protection, as we recommended in the analysis. “Should the national stadium be built or should it be diverted to environmental protection or other infrastructural needs,” Altiparmakov said.
Member of the Executive Board of Eurobank Direktna banka Milan Vićentić drew attention to the fact that in the past three quarters, commercial banks have injected 1.5 billion euros into the economy through loans and guarantee lines, and in 90 percent of cases, private companies.
“When it comes to inflation and interest, unlike the 2008 crisis, the banking system is far more prepared and organized.” The level of NPL loans is well below five percent, and we are closely monitoring whether inflation will reach the ceiling and whether there are indications that the share of NPLs will increase, because the price of money depends on it. The good news is that the growth of the share of NPLs is not happening at the moment, and there are no indications that it will happen ,” Vićentić said.
The Belgrade Economic Forum is being held for the 22nd time, and is dedicated to the analysis of key political, economic and business events in the coming year, Biznis writes.
