There is a thin line between the “most successful economies in Europe” with a forecast growth rate of six percent this year and one of the five poorest countries on European soil, in fact, in our case, there is none.
Whether economic growth is announced by the Government at six percent or the IMF’s 4.5 to five or only four, as the Fiscal Council talked about, the fact is that one year cannot change much and that Serbia would need to have a good growth so that it could even reach the level of some of the countries of Central and Eastern Europe, with which we want to compare.
We are still very far from the West.
Corruption and the lack of the rule of law, which contribute to the poor quality of institutions – which economist Pavle Petrovic from the Fiscal Council spoke about as the main obstacle to development – is the main cause of slow economic growth for Professor of the Faculty of Economics Dejan Soskic.
Due to the bad last year and the pandemic, notes Soskic, we will have a higher growth rate this year and it may be five or more percent.
“All the assessments agree here, especially when we have in mind the allocations for infrastructure, but also for the environment. However, we are far from the countries of Eastern and Central Europe, we need continuous growth rates of five or six percent from year to year, and that is possible only on the basis of larger investments,” points out Soskic.
He says that Serbia does not have enough domestic investments, first of all, and that the number of foreigners dropped additionally last year due to the pandemic.
“It is a consequence of a bad institutional environment for investing, about which we all know a lot. The absence of the rule of law to a sufficient extent, everything that is indicated by international institutions and the Fiscal Council, the high level of corruption, is a lot of unfavorable circumstances that hinder the main engine of development, and that is domestic private investments,” Soskic emphasizes.
Those investments are so low, he says, that we could even talk about accelerating economic growth, because that is why we have a lower growth rate every year than we would otherwise have.
There is, notes Soskic, an excellent analysis of the Fiscal Council where it is established how much a higher level of corruption in Serbia costs us compared to countries in the region and a clear conclusion that a high level of corruption takes away our growth by half or one percent per year, which are otherwise similar to us.
Despite the recommendations of the Fiscal Council that in conditions of crisis, money must be saved and used rationally, in the previous year, the state set aside more than 7.6 billion euros to help the economy and citizens.
Apart from, many would agree, the necessary help in the pandemic, the state, however, had other expenses – for some necessary, for others and not so purposeful. Like the ones for the army, where Serbia allocated 50 million euros a year from the budget until five years ago, as much as 300 two years ago, so that the rebalance of the budget for 2021 envisages more than 700 million euros for defense.
“I don’t know what that is for, Serbia has invested more than two percent of GDP in defense, which is more than the surrounding countries. Is that necessary, I don’t believe it is, if others can allocate less, so should we. However, those other countries in the region are members of the NATO pact, maybe that is the price we have to pay because we have chosen to be outside that environment in which everyone around us is,” says Soskic.
In any case, he notes, less should be set aside for defense, especially in a sensitive year like this, when the negative trend of public debt growth should be stopped.
“I think that these expenses are really not necessary, because they very often end up with Serbia buying weapons that are not only an immediate expense but also a GDP, and often accompanied by allowances, maintenance, which will have to pay taxes,” our interlocutor points out.
Soskic reminds that Serbia is among the five most underdeveloped countries on the European continent, along with Moldova, Albania, Northern Macedonia and BiH. That is why, he believes, much more investments are needed that would be focused on the competitive part of the economy.
“This is where the source of growth should be sought, and that is possible if you have an organized environment for investing, strengthening institutions, reducing corruption, but also strategic investment in education, science, health, because these are things that directly affect productivity in the national economy. For now, our arrival in Central and Eastern Europe is a long way off, and that is why we need long-term sustainable growth rates of more than five and six percent to start reducing the gap,” said Dejan Soskic, adding that we must not forget that other countries have dynamic growth rates and that we need to be significantly faster in economic growth and development to start catching up.
Economist Ljubomir Madzar says that there are no real and necessary conditions for growth estimates because no one knows how long the pandemic will last, and any forecast is therefore a mere guess, Danas reports.
