Serbia’s public debt at the end of this year will amount to about 60 percent of gross domestic product (GDP) or something beyond that, which is a relatively high level of public debt for the country at the level of development of Serbia, but not yet critical in terms of public crisis debt, said professor of the Faculty of Economics in Belgrade Milojko Arsic.
“The increase in public debt will be approximately equal to the amount of the fiscal deficit, which means that the debt will be around 30 billion euros at the end of this year, which will be around 60 percent of GDP or something beyond that,” Arsic said at the presentation of the new issue of Quarterly Monitor published by the Faculty of Economics.
He reminded that a fiscal deficit of 3.5 billion euros is planned this year, and that, unlike last year, when a significant part of the fiscal deficit was financed by deposits that existed from the concession for the airport “Nikola Tesla” and Komercijalna Banka, now finance most of the fiscal deficit by borrowing.
Arsic estimated that problems due to the relatively high public debt could arise, if the interest rates in the world increase, so the costs of new borrowing and refinancing of the public debt would be higher.
Therefore, he believes that work should be done to reduce this fiscal deficit in time in the coming year and to stop the growth of public debt levels relative to GDP.
Arsic thinks that for now it is not difficult to implement such a policy of low deficit, because it is possible to achieve it by slowing down the growth of state expenditures, which means that it is not necessary to increase taxes and reduce expenditures.
“They can be implemented without increasing taxes and without reducing the absolute level of public expenditure. It is only necessary to keep the largest expenditure public positions, which are salaries in the public sector and pensions, under control, ie to ensure that they grow more slowly than GDP,” Arsic pointed out.
According to him, that, with appropriate control of other expenditures, would ensure that with the growth of the economy, the fiscal deficit is reduced to the level of about two to three percent of GDP, and with the growth of the economy of four percent, it would ensure that the debt-to-GDP ratio decreases, N1 reports.
