In 2022, Serbia will have a gross domestic product (GDP) growth of about 2.5 percent, which in the Western Balkans region will be better only than North Macedonia, so if it was a tiger in the region, which was not difficult, it is no longer it will not be possible, said Branimir Jovanović, an economist in the sector for the Western Balkans at the Vienna Institute for International Economic Studies.
“For the year 2023, we estimate that the economic growth of Serbia will be even lower than last year and will amount to around 1.9 percent, which will be better only than the GDP growth of North Macedonia and Bosnia and Herzegovina,” said Jovanović in an interview with the Beta agency.Â
As he said, Serbia had the best economic results in the region in the past few years.
According to him, the reason why GDP fell is that investments stopped.
“Total investments in Serbia in the first three quarters of 2022 grew by only 0.3 percent, while in 2021 they grew by 16 percent. This is a consequence of the stagnation in foreign investments, which were the main engine of growth in the past years. In the period from 2017 to 2021, they amounted to 7.3 percent of GDP, and in 2022, in the first three quarters, they amount to 5.5 percent of GDP, which is a real reduction of about 25 percent,” he said.
He added that investments from EU countries have “continued”, and the proof is that in the first half of this year, only one quarter of the total foreign investments in Serbia came from the EU, while in previous years their participation was around 60 percent.
He said that investors from the EU have become reserved in investing in Serbia, due to Serbia’s unclear position towards the war in Ukraine, which some have publicly announced. Although, as he said, investors are not too interested in politics, they are looking for stability, including political stability, they want to see that Serbia has a clear European perspective, to know that they are investing in a country that will soon be a member of the EU.
“The expectations are that economic growth this year will be slightly weaker than last year, but certainly, much more important than the growth itself is how it is distributed, that is, whether it improves the life of everyone, or only a small group of privileged ones.” And that is one of the biggest economic problems of Serbia, which has an extremely unfavorable income distribution,” said Jovanović.
He added that Serbia has one of the highest rates of poverty and inequality in Europe, and that is why it is possible that despite the overall economic growth, a large number of people do not feel an improvement in their personal economic situation. According to him, this happens especially in crises, such as the current one, when prices rise, because they affect the poor more than the rich.
He stated that the measures taken so far by the Government of Serbia, such as the increase in the minimum wage, the increase in salaries in the public sector and pensions, are good and should prevent a large number of people from falling into poverty due to rising prices.
However, as he said, these are all incidental and one-time measures, and what is needed to reduce poverty and inequality are systemic changes, such as reforms in the social protection system, greater investments in education, greater investments in regional development and similar measure, which has not been improved for decades.
Jovanović said that inflation in Serbia will be high this year, due to the effects carried over from 2022, when prices rose sharply.
“Our Institute projects that the average inflation rate in Serbia in 2023 will be around nine percent, and we estimate that it will only drop to around four percent in 2024, which is within the target framework of the National Bank of Serbia (NBS), but again above inflation from the period 2014-2020 year”, said Jovanović.
The good news, he said, is that the prices of primary products, food, oil and gas, on international markets have been stable for several months, which could mean that the worst is over, but the bad news is that current expectations are that inflation will and in the medium term remain slightly higher than before the pandemic, due to the energy separation of Europe from Russia, which will increase the production costs of European companies.
He added that salaries this year due to inflation, however, will not drop in real terms because in the public sector they are higher by 12.5 percent as of January 1, and the minimum wage by 14.3 percent, which should influence other wages to rise to some extent. similar scope. The expected inflation for 2023 is, as he said, around nine percent, which means that the average salary, in real terms, should have some minimal growth.
When asked whether 70 percent of inflation was imported, Jovanovic said that the story of inflation is more complicated than the jump in prices on world stock exchanges.
“Serbia already had inflation of almost eight percent at the end of 2021, which was a consequence of strong economic growth after the pandemic subsided. When global food and energy prices spiked in early 2022, after the attack on Ukraine, it fueled inflation, but global food and energy prices have been stable for some time, and prices in Serbia continue to rise. “This is mainly a consequence of what economists call corporate greed, that is, that certain large and powerful companies use the current inflation as an excuse to increase their prices even when there is no real need,” said Jovanović.
He added that because of this, economists started recommending that countries limit prices, in order to prevent abuses, and Serbia did the same for basic food products, which alleviated inflation a little, but despite this, the price of food increased by about 23 percent. only in 2022, which means that the measure was not very effective and that some companies did not comply with it, Danas writes.
