The world crisis of 2008 showed that the economy cannot survive without the help of the state. I am surprised by the calls not to help at all – that economy will fill the budget tomorrow. If 100,000 people lose their jobs in Serbia, it can cause social unrest and be a big problem, warns Zoran Drakulic in an interview for Danas.
A few months ago, we heard claims that the GDP in Serbia will not fall this year, and it is the only one in Europe. In July, we are in an even more difficult epidemiological situation than in April, when that statement was made.
Zoran Drakulic, the president of the business club Privrednik, which gathers the biggest domestic businessmen and the owner of the company Point Group, points out that there was another epidemiological situation at that time, but this second wave significantly affects the economy.
“We saw that they had to turn off one blast furnace in Smederevo due to less demand. The automotive industry is in trouble. We will see the real picture of the economy only in September, October. Although I would not like to speculate about the fall in GDP, these estimates that there will be no fall in economic activity are out of the question. Estimates are being adjusted downwards across Europe. The IMF is reducing the forecasts significantly, and those are still speculations, and the result for the whole year cannot be seen,” says Drakulic in an interview for Danas.
The unions warn that 300,000 people will lose their jobs by the fall, assuming the pandemic does not stop. Is there a danger that a wave of bankruptcies in the economy will start in the fall?
I would not speculate with the figures and whether there will be 300,000 fired. It is enough for 100,000 people to lose their jobs and make it a big problem. This can cause social unrest, not only in our country but everywhere in the world. When people are dissatisfied, they do not have adequate income, what else to do. He will take to the streets.
As for bankruptcies, that is possible. That is why we need to work on getting out of bankruptcies faster. This is a normal thing in the world. We saw it in 2008, and now. The company goes bankrupt, someone else buys it and starts from the beginning. The whole procedure must be accelerated, not the processes take years.
Will the economy be able to get through the year without additional state aid?
The world crisis of 2008 taught us that it cannot. I am surprised by the comments from academic circles that there is no need for another round of help! The economy, which needs help now, will fill the budget tomorrow. She fills it even today. At certain moments, the economy needs help, so that it can work again tomorrow and in that way return the money to the budget.
But we heard that there was no more money in the parish.
I wouldn’t be so firm. Whether the indebtedness will be 60 or 70 percent of GDP is now less important. After all, it is a trend in all countries. The European Union is preparing more than 1,000 billion euros in the next seven years for the economic recovery fund. Of that money, 500 billion euros will be non-refundable aid (Merkel: “In this situation, loans are a cornerstone of the economy”). And we have to help our economy if there is space, and there must be.
This year we will have less foreign investment and fewer remittances. Construction is already in trouble. From conversations with the owners of construction companies, I learned that more than half of the contracted jobs from the beginning of the year have now been canceled. There are no new jobs for next year, because everyone is waiting to see how the situation will develop before they start new investments. Our only bright spot is agriculture. We had a good crop of wheat. I hope it will be similar with corn, if the weather conditions don’t disturb it.
The aid package adopted in April was generally assessed as good, large funds are intended for the economy, but now that this crisis is permanent, how do you look?
The aid package was what the state could provide at the time. Although it dealt with figures that are not objective. What goes to the taxpayers is about 800 million euros that the state paid for the minimum salary of employees. We have to return everything else. We have to pay taxes from January 2021, and we also have to repay the loans, because the repayment has only been postponed for three months. It deals with huge numbers that are not realistic. That’s why I’m saying that there is room for another, smaller package.
What measures would you suggest?
I would not talk about concrete measures now, but the state should talk to businessmen to see how much space there is and what is realistic.
Does the Government consult with businessmen from the Privrednik club?
No, big businessmen who could help at this moment were not consulted. I don’t see a reason why that is. It is not just the behavior of this government, it is something that is repeated.
Does that look like the animosity of the state administration towards domestic businessmen?
Well, obviously. They present us as those who destroyed Serbia, and the reality is completely different. We have great businessmen who do well, pay taxes regularly. Precisely because of such a relationship, no one engages in large investments, because there is no security. What is started is done and those are the basic things. It is not right to rely on strangers. I think there is more potential in the domestic economy. When the attitude towards domestic employers changes, the economy will be different.
Everyone says the problem is a lack of domestic private investment. But everyone is talking and no one is doing anything about it.
The problem is that we don’t have a strategy given what’s going on. To see what should be invested in, where to engage domestic businessmen. And of course we have the help of the state. I’m not talking about financial help here, but moral help.
You mentioned 2008. In our country, the economic crisis turned into a banking crisis. Is there a danger of a similar scenario now?
Of course. If the economy does not function, it cannot repay the loans. This also puts banks in danger. We see that there is talk of extending the terms of consumer loans in order to reduce the impact on citizens.
The situation with banks should be taken into account. A few days ago, we saw the news from the United States that the four largest banks set aside 28 billion dollars for provisions to cover bad loans. The fewer jobs there are for companies, the less liquidity there is. And that then means that there will be no money to repay the loan, there will be no money for regular business. That will be the biggest problem.
The biggest risk is perceived as the automotive sector, which is also going through a major crisis globally. Factories that produce auto parts have become a large part of our industry, and they also received significant subsidies upon arrival. How do you look at it?
At the moment, people are saving. Few people buy a car, new clothes, or almost nothing but existential products. If cars are not bought, of course, both production and demand for parts will be reduced.
As for subsidies, we will now see how those companies will behave. I have always been against subsidies to foreign companies, or at least not to give them more than to domestic companies. I think that domestic companies will get out of this crisis the best.
How do you see the promises that salaries in the public sector will increase next year as well? Can the private economy withstand that?
In the current situation, I am absolutely against the increase in salaries in the public sector. That would be utterly irresponsible!
First of all, the public sector needs to be cleansed of cadres who have been given jobs on the basis of party affiliation and many of whom do not even come to work.
Also, the management of public companies should be entrusted to the best, professional people on the market through a competition. They must not be in VD status and must be paid appropriately.
When the situation normalizes and the economy takes an upward trajectory, we can talk about the correction of salaries in the public sector, Danas reports.
