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What awaits Serbia in 2023

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Is the glass half full or half empty? The impressions from the past 30th Kopaonik Business Forum could be reduced to this dilemma.

Anyone who listened only to ministers and other state officials could get the impression that, although the crisis from the pandemic, through the energy crisis to the crisis caused by the war in Ukraine is the largest in history, our economy successfully overcame all obstacles, that it is the leader in the region and beyond and that good times await us.

The Minister of Finance Siniša Mali and the Governor of the National Bank of Serbia, Jorgovanka Tabaković, reflected a lot on how it was ten or 12 years ago, and how everything is much better now.

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On the other hand, we also had some experts, for example the President of the Fiscal Council Pavle Petrović or the former Minister of Finance Dušan Vujović, who noted that although a large part of inflation is imported, at least a third is of domestic origin, as evidenced by the base inflation of 10 percent.

Governor Tabaković insisted that two-thirds of our inflation was imported, that the so-called helicopter money during the pandemic did not affect our domestic inflation.

According to her, inflation will be halved by the end of the year compared to the inflation at the beginning of the year.

Also, the topic of topics is the biggest economic problem of the last year, the energy sector. According to the estimate of the Fiscal Council, EPS and Srbijagas will cost the budget 3.5 billion euros in total during the energy crisis.

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Pavle Petrović called delaying the increase in energy prices “bad economic policy”.

For the recovery of EPS, Petrović assessed, investments in the recovery of production and in new mines are necessary. 

In the longer term, EPS must also invest strongly in the energy transition. Huge investments are necessary, more than 10 billion euros in the next 10 to 15 years – he stated.

On the other hand, businessmen welcomed the Government’s decision to shoulder the burden of rising electricity and gas prices last year.

However, given that Serbia concluded a stand-by arrangement with the IMF at the end of last year, such a policy is most likely over.

The new head of the Fund’s mission in Serbia, Donal McGettigan, pointed out that energy prices will have to rise.

“It is not a good time to postpone price increases,” he said, adding that “fundamental changes” will have to be made in the energy sector.

Dušan Bajatović, director of Srbijagas, has already announced that by the end of the year, gas prices will have to rise at least once, and maybe twice.

Minister of Energy Dubravka Đedović and Minister of Finance Siniša Mali and Prime Minister Ana Brnabić spoke about the reform of public companies, especially energy companies.

It is certain that EPS will become a joint-stock company, but they did not go into further details about the reorganization of this giant company that is crucial for energy security.

However, we were assured that there will be no shortage of energy for the next season.

Finance Minister Mali said that the average salary in December reached 718 euros, that the state remains with the Serbia 2025 plan, according to which the average salary in December 2025 will be 1,000 euros, and the average pension will be 430 to 450 euros.

Mali said that we should go to get the Hungarian salary (which was 980 euros), and then “one EU member at a time”.

However, there will be obstacles on this path. Thus, the representative of the IMF indicated “the need to limit the fiscal deficit, as well as limit the growth of wages and pensions.”

Given that Serbia is a small, open economy that largely depends on foreign trade and especially foreign direct investments, our economic future will depend on what happens in the world, above all in the EU, our largest economic partner.

And Indermit Gil, chief economist and senior vice president of the World Bank, called the European Union the weakest link in the world economy.

He announced a difficult economic year. 

“Even if there is no recession, the growth of the global economy will be the third smallest since 1990.” And next year won’t be much better either,” Gil said.

He praised the fact that Serbia managed to maintain macroeconomic stability during the pandemic, but also pointed out that now is the time for economic growth.

Based on the experiences of countries that achieved strong economic growth in the 1990s, Gill derived four key conditions for dynamic growth.

Macroeconomic stability, which is a necessary condition, which means balanced budgets and low debts.

Another factor is the perception that the private sector drives the economy, not the government.

“Private investments are important, and this means that tax rates are not increased, but only tax coverage. “Also, when choosing public investments, priority is given to those that support the private sector,” he said.

When all this is done, foreign investment comes in and supply increases. In those countries, the supply first grows, and only then the demand, so the produced goods have to be sold somewhere, and because of this, there was a huge growth in international trade in this period.

The fourth factor in the progress of developing countries was better social protection and better assistance to the vulnerable.

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