Economic growth this year will be high – according to the latest estimates, around 7.4 percent, which ranks Serbia among the most successful countries in Europe. Public debt will not exceed 57.5 percent of GDP. The budget for 2022 is developmental, projected on the planned growth of 4.5 percent and a deficit of three percent.
The plan of the state treasury envisages an increase in the standards of citizens – an increase in salaries of seven percent in the public sector, for members of the army, health and social services by eight percent.
The increase in pensions will be done according to the Swiss formula of 5.5 percent. At the end of January or the beginning of February, pensioners will receive 170 euros, and health workers 85 euros.
Economic results are better than expected, Serbia’s economy has reached pre-crisis levels, says Aleksandar Vlahovic, president of the Association of Economists of Serbia, for the show “In the spotlight” – Economic Challenges, Results and Forecasts of Radio Belgrade 1.
“I would especially like to point out the positively high level of capital investments, which this year amounts to 7.7 percent of GDP, and especially the high level of economically productive investments, which were 6.4 percent. The program of support to the population and economy was extremely generous. It is also positive that commercial banks, together with the state, have formed more than two billion euros of liquid funds to finance the economy in all conditions,” Vlahovic said.
There is a good opportunity for the planned reduction of the fiscal deficit in 2022 to be even more ambitious, which was proposed by the Fiscal Council in a timely manner, believes Professor Pavle Petrović, President of the Fiscal Council.
“From a fiscal point of view, entry into next year is favorable, the deficit has been reduced to 4.9 percent and if we subtract spending related to the Covid crisis – the deficit is reduced to about one percent. But if the energy crisis requires additional measures, the structural deficit may further increase,” states Petrović.
He adds that the high level of public investments, which is planned for 2022, should be a significant driver of economic growth in the next year.
According to him, salaries in the public sector and pensions must follow the economic strength of the country, to increase in line with income.
The government can influence the standard of living by continuing to create conditions for high economic growth, primarily by encouraging the development of the domestic private sector, small and medium enterprises. Also, long-term reduction of public debt leads to higher economic growth, investment that is the way to get a credit rating,” says prof. Petrovic.
Inflation, energy crisis, pandemic – the biggest challenges
Professor of the Faculty of Economics Milojko Arsić predicts that inflation will amount to more than eight percent this year, and that it will average five or six percent next year.
“In addition to high inflation, which will enter 2022, energy prices are also high, and there are also problems in the operations of large public and state-owned companies such as EPS, Telecom and Air Serbia. In addition, it is unknown how the health crisis will continue and what kind of further economic recovery the European economies will have, with which the Serbian economy is closely connected,” points out Arsić.
The NBS estimates that at the end of the second quarter of next year, inflation will stabilize and return to the target range. Professor Petrovic emphasizes that inflation is caused by external factors because its main elements are the prices of food and energy.
“In a way, that can be encouraging in terms of its braking, because the so-called core inflation – when food, energy, alcohol and tobacco are excluded – is three percent,” said Prof. Petrovic and he estimates that from the middle of next year, inflation should calm down in the world and in our country.
Aleksandar Vlahović states that a lot has changed with the Covid crisis
There has been a sharp rise in prices because supply chains have been disrupted. Markets are closing, as illustrated by the cost of transporting one container from China, which has risen 10 times since the pre-pandemic period, further affecting all inflationary pressures. The NBS is very carefully analyzing inflation trends and preparing measures for this growing inflationary spiral,” Vlahovic believes.
Another challenge is the situation in the electricity sector. Aleksandar Vlahović states that a few days ago, the import of electricity was between 600 and 1000 megawatt hours per hour.
“The daily allocation for the import of electricity is around five to six million euros, and for the import of gas, even higher,” says Vlahović.
Therefore, in such an environment, economic policy should have as its primary goal in 2022 the preservation of macroeconomic stability, suggests Professor Milojko Arsić.
“Fiscal policy should move in the direction of a significant reduction of the budget deficit while maintaining high public investments, while monetary policy should gradually and controlledly reduce its expansiveness,” says Prof. Arsic.
He points out that, if these conditions are met, inflation could be curbed during 2022, with solid economic growth of about 4.5 percent, which, he adds, would have a positive impact on the standard of living, RTS reports.
