Drastic decrease of the budgetary deficit is one of the key difficult tasks before the Serbian Government. The works are intensive in the Ministry of Finance and Economy, in order to pass a set of laws to the national assembly in September, to commence the fiscal consolidation. Judging by what has “leaked” so far into the public, there will be no radical measures of lay-offs in the public sector. The economists claim it is hard to expect lower budgetary expenses without limiting of wages and pensions, and they stress that it requires a political and social agreement. Zorica Mijuskovic has more.
According to the announced measures, the first source of savings will “trimming” the salaries in the public sector, especially for the company managers, because two thirds of the budget is allocated for salaries and pensions. Instead of having close to 5,000 euros, the maximum basic wage for managers will be decreased by 70%. Also announced are the savings through smaller number of agencies, as there are currently 130 and they cost the state at least 800 million euros each year. So far, Serbia has been living above its abilities and maintaining the current economic concept, based on loans and consumption on all levels, is unsustainable.
The national bank has modified the forecast of the GDP growth to -0.5% for this year, due to the faltering of the agricultural production following the drought, but also because of the deteriorating perspectives of the economic growth in the euro zone. National bank expert Branko Hinic has stated that the deficit of current payments by the end of the year will amount to 3.1 billion euros. According to him, the highest rate in the first six months was 1.9 billion, while it is expected to return to the level of 8% of the GDP by the end of the year. The key reason lies in the boost to the net exports in the car manufacturing industry, as it is estimated to reach 560 million euros by the end of the year.
Switching to the line of sustainable economic development and returning to own resources is the only way that can take Serbia out of the crisis. Without the support of the IMF, the state cannot provide the assets to pay the public debt, which has surpassed 50% of the GDP. The experts point that only a new standby arrangement could secure the macroeconomic stability, reinforce the trust of foreign investors and send the message about the government that runs a responsible economic policy. Besides, the positive attitude of the IMF has direct impact on the economic rating of the country and credit conditions in the international market.
This is of special importance for the new authorities, after the Standard and Poor’s agency has lowered the rating of the long-term state debt to BB minus. Minister of Finance Mladjan Dinkic has stated earlier that Serbia could not have avoided this drop, due to the record budgetary deficit and increase in the public debt. Dinkic has announced the fiscal consolidation measures, because Serbia is in recession and must cut down the public expenses. Also necessary are the thorough reforms of the public sector, tax and retirements systems, reduced expenses and increased budgetary revenues. The realization of this strategy requires a supervisor like the IMF, because giving up on saving would result in public debt crisis, inflation, uncontrolled weakening of the national currency, drop in the employment rate and living standard.