The state headed by the President of the Republic has shown seriousness and responsibility in the fight against the coronavirus.
The CEO of Mona, Tomislav Momirovic has published a text discussing the financial consequences of the new situation with the coronavirus.
Emergency procurement of equipment, hospitals, quarantine centers, emergency funding and supplies were undertaken. All in all, our country has passed the exams of a much richer country and failed to meet the first blow of the crisis. This, unfortunately, is the beginning of a painful fight that will certainly take many casualties and have terrible consequences.
I am not a doctor and I can only strictly follow the instructions I do.
As businessmen, my brother and I have made all of our companies’ assets available to the Government to combat the epidemic, and we are using all our resources to help end this horrific episode in history as quickly as possible.
As a businessman, it is my duty to say, point out and propose a series of measures that would reduce the catastrophic consequences of this epidemic.
It is not in dispute that urgent and decisive action by the Government, a kind of financial counter-balance on the Crown, is needed to save the life of the Serbian economy.
Much of the company is already on artificial respiration and unable to meet its obligations to banks, workers, the state and suppliers. The Corona not only caused the revenue to fall, but in many cases their complete absence.
Time does not work for the Serbian economy. The mistakes of 2008, when we took a scoop and timidly introduced measures to help the economy, turned out to be a complete debacle. The effects of sprawling and shy measures did not have a significant impact on economic activity, although over time they had a significant impact on public debt growth.
Today, we must respond to challenges in a timely manner and avoid past mistakes. Thanks to policy and courageous fiscal consolidation so far, public debt has been significantly reduced, leaving the country with the opportunity to intervene vigorously and prevent the 2008 scenario.
We are witnessing that in the US such measures are being prepared in the form of direct intervention by the Fed in an amount initially approaching 1,000 billion dollars. By comparison, Serbia’s social product is about 50 billion dollars.
It is not difficult to predict at what speed, but also at what severity, the problem in these areas will spill over to all other branches of the economy.
The financial counter-balance must be strong and sharp.
Combating the crisis caused by the Corona virus has three elements:
Ensure human health and stop the virus.
Ensure the minimum functioning of the state during quarantine.
Prepare the economy for the period after the virus has stopped.
Although it does not seem to be a priority, it is necessary to prepare the economy for the period after the virus has stopped.
Talking to businessmen in Italy, Slovenia, Germany and here and monitoring the situation in the world, there are three problems facing the economy during and after the Corona crisis:
1. How to Save Jobs
2. Repayment of loans and leasing and stability of the financial sector
3. Problems of small, medium and micro enterprises (salaries, taxes, rent, loans)
Due to responsible fiscal policy in the last 8 years, our public debt is relatively small and amounts to only about 52% of GDP. That is why today the state has the space to preserve jobs and hard-won economic stability through additional borrowing through targeted efficient and timely measures. The whole world is expected to do the same, including conservative Germany. There is no reason for Serbia to think or be late, as otherwise we will have a collapse in transport companies, construction, tourism, and especially in export-oriented companies, with strong negative effects on the rest of the economy. Also, micro and small businesses will be affected by quarterly costs (flat tax, rents, salaries, loans, utilities).
The aim of the measures must be to protect workers, employers and the financial sector.
In this text, I have outlined several measures that can effectively act to mitigate the effects of a crisis if it is responded immediately. The measures need to be further elaborated in the expert bodies of the Government, but it is important not to impose unnecessary administrative restrictions and to design complicated procedures. The measures should be as simple as possible and implemented as easily as possible in order to stabilize the economy.
Assistance to business entities:
The good thing is that under most measures there is no need to provide funds immediately, but it is enough to provide tax credits while providing the money to finance the deficit in the meantime.
With these measures, the government would borrow 3-5 billion euros (5-10% of GDP) and spend 1-3 billion of foreign reserves.
The question remains of reducing VAT revenue. It would be short-lived. With an increase of 3-5 billion in the period April 15 – December 31, the VAT loss would be compensated. If stabilization in the health field occurs and the measures are effectively implemented, it is possible that at the end of the year VAT revenues will be higher than planned.
All proposed measures should also analyze the political implications, but it is quite certain that if aggressive measures fail, the GDP decline will be double-digit. The proposed measures have no obvious negative effects other than an increase in external debt. Of course, this is a real stabilization price and it is not to be underestimated, but other countries in Europe as well as the US will do the same.
It is ungrateful to compare this situation with anything in the recent past, but we have already had experience of fiscal consolidation and it has proven that courageous and responsible leadership can do a lot.
We now need a similar counter-balance to the state, Srbija Danas reports.
