Wages, pensions hike carries with it “no fiscal risk”

Published on 25. October 2017., News

Finance Minister Dusan Vujovic expects no increased fiscal risks from a hike of public sector salaries and pensions, that the government has announced.

Following his address at the 17th Economic Summit of Serbia entitled “Roadmap toward Improving Competitiveness”, Vujovic said that increase is covered “with what has been achieved so far” – which could be the basis for one-off hikes this year, as well as a higher base for growth in the next year.

“We have defined precisely the areas in which increases and adjustments can be made this year. We expect that, from today’s position where we have 86 billion dinars of surplus in the state budget and estimates of 100 billion, we will for the first time have a three-digit general government budget. We expect to have at least 35 to 50 billion surplus by the end of the year and this will be the space in which we can provide increases of salaries and pensions, and one-time benefits,” the minister said.

Vujovic added that there was also room for one-time 5,000 dinar payments for pensioners, as well as public sector awards.

“We also have room for alimenting some of the costs that have been waiting for the years to be alimented, and for setting up funds to support start-ups and other very useful initiatives to boost economic growth,” he said.

According to Vujovic, “next year we expect projected real growth of 3.5 percent, which, with the planned inflation, creates room for increase in salaries and pensions announced by the prime minister in the amount of up to ten percent.”

He underlined that this does will not increase fiscal risks, and fully fits into “the sums and structural parameters.” According to him, structural parameters are the expected contribution of wages and pensions in the country’s GDP.

The minister said that Serbia’s government is making projections conservatively, and agrees with international financial organizations that due to the cyclical element of upward adjustment of agriculture and energy, as well as the expected long-term growth rates, the economy’s real growth will be at least 3.5 percent.

“If we continue the trend of increasing FDIs and job creation, I expect that we will surely reach the projected growth in nominal and real GDP, as we have planned, that we will be in a position to, without tension, support the increase of salaries and pensions,” he explained.

Vujovic stressed that “every year so far we did better than projected revenues in real performance, and expect this will be the case in the coming years as well.”