Serbia, Next year brings much more pressure for employers

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The economic situation in Serbia, as well as in Europe and the world, is burdened by the consequences of geopolitical events on the global and regional stage, the consequences of the costs incurred during the pandemic that particularly affected certain branches of industry, the prices of energy products which are high and it is not certain whether they will stabilize the situation in the near future, as well as the decline in economic activity as a consequence of all of the above.

For the economy and citizens, this means an increase in the cost of capital, consequently reduced opportunities to access credit and lower purchasing power, the need for a more rational use of financial resources because we are facing the challenges of reduced business liquidity, and it is expected that this will affect the company’s operations and quality of life of citizens in the following year.

This is how Dr. Slađana Benković, professor of the Faculty of Organizational Sciences of the University of Belgrade and head of the Department of Financial Management and Accounting, assesses the current economic situation in Serbia and the region . In an interview with, she talks about the business climate and the results of the economy at the end of this year, the recession, the effects of events in the European Union on Serbia, as well as interest rates and the energy crisis.

What kind of business (company) results do you expect at the end of 2022? Overall, how do you assess the business climate in Serbia this year?

“The business results for the year 2022 are satisfactory, taking into account the state of the market itself and the aforementioned circumstances that led to the growth of inflationary trends and the cost of capital, on the one hand, and the fall of industrial production in the second half of the year.” I believe that there will be much greater pressure for employers in the coming year, when the challenge will be to preserve production, jobs, exports, and dealing with business insolvency…”

How much has the growing inflation affected the business and when could stabilization of prices and markets occur? How real is the threat of recession?

“The recession is no longer in dispute and we can say with certainty that it has already occurred in some countries, and that it will occur in some countries.” We are already feeling this state of decline in economic activity through the rise in prices of products, credit arrangements (both contracted credit lines and those in the process of being approved), services (including utilities), the rise in the price of energy… And when you ask when this painful thing will end state, providing an answer to that question does not mean that the damage that has been done in the meantime will suddenly disappear. Therefore, the risk sectors of international companies say that in the summer of 2023, a ceiling of inflationary trends can be expected, but the question remains as to what state the world economy will be in at that moment. In other words, we are facing an extremely challenging period, economically, but also financially. Maybe for some market participants it is an opportunity.

The Serbian economy is largely oriented towards the countries of the European Union and the region. How will the developments in these markets affect the direction of our development?

“Great question. Personally, I think it’s not thought about enough. Or to be more direct, we are tied to the euro as a currency, we borrow from the European Investment Bank, we use the advantages of grants from cohesion funds for strengthening institutional and human capacities obtained from the European Commission, we are surrounded on all sides by countries that are either already members of the EU or are in the process of joining the EU. In the end, Serbia is geographically definitely in Europe, but our strategy for entering international markets is not aligned with the policies of the European Union. And yes, my opinion is that it will certainly have an impact on the process of Serbia’s accession to EU membership, and in that sense also on the dynamics and direction of development.”

The National Bank of Serbia has been increasing the reference interest rate since April, for nine consecutive months. Some experts claim that further growth of the key interest rate can be expected. How do these developments affect the economy and what do you expect in the coming months? To what extent will the monetary policy of central banks such as the ECB and FED affect the business conditions in Serbia, and how much will the banking sector be affected?

“The National Bank of Serbia follows events on the world stage and it is certain that they will correct the reference interest rate in the coming period as well.” It is a consequence of the increase in the cost of capital at the world level and a response to increased inflationary trends. The price of capital that is placed must be higher in relation to disturbances, such as inflation, which make the financial market itself imperfect. I personally think that this trend will continue during the next year, especially in the first six months. Our banking system is not part of the banking system of the European Central Bank, but financial operations are related to the currencies of the ECB and FED central banks, so changes in the value of those currencies will be reflected in the monetary system of Serbia, including arrangements related to business with third countries, which are expressed in euros, i.e. dollars.”

The energy crisis is shaking the whole of Europe, during this winter a shortage of gas, oil, electricity is expected… How much would possible power restrictions and the lack of certain energy sources affect the Serbian economy? Do you expect the state to help companies and entrepreneurs in some way?

“This question is perhaps more aimed at the representatives of our government, because they can certainly better answer the question of whether we will face the challenges of shortages of anything, including energy sources.” We believe that almost certainly not this winter, but in my opinion it is certain that 2023 will be the year that the situation on the energy market will mark and affect all world economies, including the Serbian one, and that the provision of energy will also be a challenge in the coming period. In this sense, Serbia should urgently harmonize the action plans related to the strategic development of energy with the newly emerging situation both in the country and in the world, and determine the priorities that are best for our country. Also, I believe that the state of Serbia has helped the economy quite a bit by keeping the prices of energy under control, Biznis writes.

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