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Sudden growth of Serbia’s budget deficit in September

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In Serbia, the budget deficit rose sharply in September and amounted to EUR 383 million, after a deficit of EUR 52 million in August, according to the Economic Report of Raiffeisen Bank for November.

“Such a high deficit was not usual for the beginning of the new business season, after the annual holidays, but it started to appear with the health and energy crisis, and it corresponds with the Government’s support packages for citizens implemented in previous years, which is also this year launched in September,” the Report stated.

In the Economic Report of Raiffeisen Bank, it is added that the negative result was contributed by the strong growth of expenses of 28.7 percent per month, while the budget revenues per month increased by only 2.3 percent.

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In September, according to the report, the Parliament of Serbia adopted the budget rebalance for 2023 and increased subsidies and expenditures for the purchase of goods and services, due to the implementation of a new program to support citizens in conditions of declining purchasing power due to high inflation.

At that time, it was stated, it was planned to increase pensions by 5.5 percent in October and 14.8 percent in January 2024, earnings in education by 5.5 percent, assistance for children under 16 years of EUR 85 was granted, subsidies to agriculture were increased.

One-time aid payments to pensioners in the amount of EUR 170 in November and EUR 85 to all recipients of social assistance are also planned, and the minimum wage has been increased by 17.8 percent from January 2024.

The budget was cumulatively in surplus only during the summer months, however, the new program to support citizens and agriculture will affect the growth of the budget deficit in the last quarter of this year. On the other hand, the budget deficit planned for this year, as stated, amounts to EUR 1.9 billion, so there is enough space for a slightly more expansive policy in the fourth quarter.

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In the first nine months, budget revenues increased by 10.2 percent per month, and the highest was corporate income tax, due to high profits in 2022 and donations, followed by VAT and excise taxes.

Budget expenditures have slightly accelerated growth since September, so that in the first nine months they increased by 12.2 percent annually. Most of the funds are intended for budget loans, 107 percent per year, interest expenses, 23.5 percent per year, social protection expenses, 14.7 percent per year and expenses for employees, 11.3 percent per year.

Capital expenditures rose modestly by 4.7 percent. In September, the public debt reached 35.5 billion euros, or 51.3 percent of the gross domestic product.

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