Macroeconomic trends worsened last year, inflation accelerated, while gross domestic product growth was lower than in the countries of Eastern and Central Europe, President of the Fiscal Council of Serbia, Pavle Petrović, said today.
At the panel “Macroeconomic trends in Serbia: challenges ahead” at the Kopaonik business forum, which started today at the “Grand” hotel in Kopaonik, he pointed out that the high inflation in Serbia and the world is mostly the result of shocks on the supply side, and inflation bad economic policy in the world, as well as errors in monetary policy, also contributed.
“Serbia is not an exception in this, and in our country it is partly caused by indiscriminate fiscal policy. In Serbia, inflation was contained by controlling the prices of gas and electricity, which were increased last year in Eastern and Central Europe more than in our country, but this was paid from the budget with 2.4 billion euros, he said.
He cited the losses of public companies in the energy sector as the main fiscal risk for this and the next year and pointed out that when it comes to the Electric Power Company of Serbia, the price is not the main problem, but a systematic decline in production.
A significant standby arrangement with the IMF
Petrović stated tonight that, if the problems in the energy sector are excluded, the budget is quite stable, and that the standby arrangement with the IMF, which understands the withdrawal of financial resources, contributes a lot to this.
Responding to questions from journalists at the Kopaonik Business Forum, Petrović said that no one-time aid payments are planned for this year, but that, nevertheless, “you never know”.
“We now have a standby arrangement with the IMF, which means that it is now quite solid. We will take approximately two billion euros from them this year. Therefore, the discipline is significantly greater. So if the energy sector is removed, the deficit is minimal,” he said.
He emphasized that, if the issue of low electricity and gas prices is resolved in the medium term, along with increasing the efficiency of EPS and Srbijagas, the state could have a balanced budget in two or three years, with enough funds for public investments.
According to his words, investments and reforms are necessary for the recovery of EPS, and the biggest challenge for this company is investments, especially in the energy transition, because products with a high carbon dioxide content will be limited in exports.
He pointed out that the basic question is whether EPS, as it is now, is capable of making those investments and added that this public company needs better staff capable of doing it.
The Head of the IMF Office in Serbia, Julija Ustjugova, assessed that these are not easy times for anyone and cited inflation and how to curb it, as well as the situation in the energy sector, as particularly big problems.
“High inflation is problematic and its effects can be disastrous. “In Serbia, two-thirds of inflation comes from food and energy, and in order to curb it, synchronous policies have been launched around the world, and the IMF’s recommendation is that the central bank should continue tightening monetary policy,” she said.
She pointed out that in order to prevent rampant inflation, it is very important to bring real interest rates to a positive level.
According to her, inflation control cannot and should not be based only on monetary policy, but also on fiscal policy.
“Fiscal policy was very strict last year, and the advice of the IMF is that such a policy should be continued in the future,” Ustyugova emphasized.
Referring to the situation in the energy sector, she pointed out that it is good that this winter it was somewhat better than expected in the autumn and that in dealing with the problems in this sector, the solution is not only to adjust the price, but it is also important to encourage the saving of electricity, but and manage well state-owned enterprises that produce electricity.
“Management of state-owned energy companies must be improved, a law is being prepared that should regulate it, and it should be aligned with OECD guidelines and limit the state’s influence in the work of these companies,” said Ustyugova.
Speaking about how to get through the global crisis, she pointed out that Serbia has proven to be a good investment destination and that in the past ten years, investments in Serbia have increased significantly.
“For Serbia, it is very important that there is proximity to the European Union as well as a competitive workforce. It is necessary to maintain macroeconomic stability, which investors like, as well as the rule of law,” she said.
She added that it is not necessary to speed up the green transition, as well as the development of human capital, which is crucial for productivity growth.
