Will the rise in interest rates affect Serbia’s debt?

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Professor of the Faculty of Economics and former governor of the National Bank of Serbia, Dejan Soskic, estimated that if interest rates rise, Serbia will be at risk of increasing the total debt, which is why prudence in conducting macroeconomic policy is “very necessary”.
He said at the online discussion “Helicopter money – The impact of fiscal stimuli on macroeconomic developments in Serbia and the world”, organized by the Friedrich Ebert Foundation, that interest rates in Serbia will depend on the behavior of other central banks.
Serbia’s problem is that if inflation rises, and there is a fixed exchange rate, there may be a decrease in the competitiveness of products from Serbia, both on the foreign and domestic markets, said Soskic.
He said that it is legitimate if the state decides for a fixed exchange rate, that many countries choose that, “but that we must know that wages cannot grow faster than labor productivity.”
Speaking about economic aid packages, Soskic states that more time must pass in order to see the effects, but that it seems to him that the countries that had linear benefits to citizens have the biggest problems with inflation.
Some measures, he says, were problematic due to linear payments to everyone without selection and recapitalization of certain companies.
“Some measures were completely wrong, such as the decision of the NBS to buy company bonds on the secondary market,” Soskic said.
The editor of the weekly NIN, Milan Culibrk, said that the key problem of Serbia is not the growth of inflation, but the potential growth of interest rates, which means higher interest rates on debt.
Speaking about the help of 100 euros to the citizens and the announcements that it will increase the consumption, he stated that the retail consumption in the first six months of 2020 had a growth of 4.2 percent, and after the help the growth was 4.3 percent, which means that the effect was negligible.
A member of the NBS Board of Governors, Ivan Nikolic, believes that we will not have any disturbances in the next period that will endanger the debtors. According to him, the growth of interest rates would potentially endanger both debtors and the corporate sector, which is a bad consequence of the crisis.
He believes that if we take into account that the pandemic is coming to an end, Serbia has achieved a good result in terms of economic measures.
Nikolic cited the example of Bulgaria, whose measures were selective, the sectors that were helped were precisely selected, but, as he said, the results were modest.
Jasna Atanasijevic, a professor at the Faculty of Natural Sciences and Mathematics, says that the growth of interest rates should worry us because it will affect Serbia’s debt. She stated that it is a “stressful circumstance” because Serbia depends a lot on borrowing.
Economic assistance measures, she said, could generally have been better targeted, the problem being indiscriminate, which she said did not lead to a significant increase in spending, Nova Ekonomija reports.