"The good results of Serbia's economic program continue. Economic growth is strengthening, and the indicators of the labor market are showing a noticeable improvement. We expect real GDP growth to be 2,7 percent in 2016 and three percent in 2017. Inflation remains moderate despite the acceleration of wage growth in the private sector. The mission supports the intention of the National Bank of Serbia to lower the inflation target to three percent ±1,5 percent. This change is a reflection of a significant improvement in the basic macroeconomic indicators and affects the strengthening of confidence. Also, the decision will help to further lower interest rates and encourage the use of the dinar in the Serbian economy. The current cautiously relaxed attitude of the monetary policy is still in line with the new goal, and the expectations are that inflation will begin to rise gradually during 2017", among other things, it is written in the statement of the team of the IMF Mission in Serbia, which was on Tuesday, November 1 finished his visit to Belgrade on the occasion of the discussion on the sixth revision of the precautionary stand-by arrangement.
In this way, the IMF determined itself according to the decision of the National Bank of Serbia (NBS), which issued its announcement on the same day, which states that, from the beginning of 2017, the target inflation rate will be lowered from 4 percent ±1,5 percentage points to three percent ±1,5 pp "The main reason for lowering the target is the significant improvement of the macroeconomic fundamentals and outlook of Serbia for the next period; above all, a sustainable reduction of external and internal imbalances, as well as the risk of investing in Serbia. Well-measured monetary policy measures and full coordination with fiscal policy measures, along with the excellent results of fiscal consolidation, have determined that inflation in Serbia over the past three years will be at a low and stable level that is comparable to developed countries and consistent with the new goal," says the announcement of the NBS.
"Very good fiscal results continue, thanks to revenues that are above the expected level," reads the statement of the IMF mission led by James Roof, "while expenditures have remained within program goals." The general government deficit is now projected at 2,1 percent of GDP in 2016. The decline in public debt is proceeding one year faster than planned and it is predicted that it will be below 74 percent of GDP by the end of the year. In view of these results, which are above expectations, the mission agreed with the plan of the Serbian authorities to use part of the fiscal space in 2016 to cover certain one-time expenditures, including payments to pensioners, as well as solving old debts of state enterprises."
To remind you, Prime Minister Aleksandar Vučić announced a salary increase of five percent in health care, culture, the army, the police, the judiciary and correctional facilities, between six and seven percent in education, and that pensioners will receive a one-time aid of five to six in December thousands of dinars. Finance Minister Dušan Vujović said on Tuesday that the increase in pensions from 2017 will be "probably 1,5 percent."
Nevertheless, the IMF warns: "In order to ensure a permanent improvement of the fiscal situation and achieve solid inclusive growth in the medium term, it is necessary for the Serbian authorities to decisively address the structural challenges." Public sector reforms must be accelerated in order to provide better public services and contribute to the fiscal consolidation process. Reforms of the education system are particularly delayed. Decisive actions are also needed so that public utilities and other state enterprises stop being a burden on public resources. In this context, the program will require the development of clear plans for a permanent solution or restructuring of RTB Bor, Resavica, Petrohemija, Azotara and MSK. It is very important to stop the practice of financing weak public entities and companies through debt to Srbijagas and EPS. In the financial sector, the strategy of resolving problem loans is yielding results, but more decisive actions are needed in order to reduce the level of non-performing loans, including in state banks," the IMF statement concludes.
IT SUBSIDIES: In mid-October, the Council for Economic Development of the Government of Serbia made a decision that in the next two years, Serbia will allocate 22,8 million for the creation of 6600 new jobs in seven cities. This would not be any special news, because it represents only the continuation of the policy of subsidizing investors, if "Endava" - a company that deals with computer programming, and "plans to invest in increasing the capacity for software development" was not among the companies that will receive incentives , i.e. new equipment, space and workers". Endava should receive 1,6 million euros for the creation of 324 jobs. The IT community, which operates without any help from the state, and which says that they don't need anything else, except to be allowed to work, reacted violently - rightly so. The Government of Serbia, i.e. the Ministry of Economy, after a series of questionable, strange, unnecessary, and some, probably, harmful contracts to attract investors, decided to subsidize the area where tens of thousands of employees are missing. So, the government decided to encourage a company to create several hundred jobs, even though - given the demand for IT personnel, which is far greater than the supply - it would hire whoever it wanted without any problems and without government money.
The IT scene reacted - Startit, part of the SEE ICT organization, launched a "Petition of Serbian IT professionals and businessmen" with the aim of having the Ministry of Economy cancel this subsidy - in order to preserve the health of "the healthiest domestic economic branch, and Serbian IT would not stifle its growth" made the sector the engine of the development of the domestic economy". Startit claims that no new people will be employed, but that the existing IT experts will only transfer from their current company to the Endava company. In just a few days, the petition was signed by thousands of people.
The owner of kamatica.com website Dušan Uzelac analyzed this decision of the government. "Since there is no equipment manufacturer in Serbia, it means that it will be bought from abroad, it also means that it will be paid in foreign currency, which means that the Ministry of Economy encourages the trade deficit and weakens the exchange rate of the dinar. (…) New, existing workers will not be employed. IT experts in Serbia are not at the unemployment office. This means that they will come from existing IT companies. Therefore, there are no new incomes based on income tax. And the larger economic effects would be that by taking over staff from existing (domestic) companies, their position will be weakened. An IT expert is a production machine, when you take away a company's machine, the company cannot work. In the year of entrepreneurship, the Ministry of Economy turns entrepreneurs into workers. (...) Perhaps the Ministry of Economy was guided by the idea that in the future it will collect profit tax because it is to be expected that a company that does well at the end of the year will also pay profit tax - wrong. Anyone who has had an encounter with the economy of international companies knows that they pay taxes where they want, and that is where the tax rate is the lowest. This is also done by Apple, Facebook, Google, Amazon and thus avoid paying taxes in their home countries, i.e. in the USA. When we take that into account, we can't help but wonder how anyone from the Ministry of Economy of Serbia will 'convince' a foreign company to pay profit tax? Therefore, the expected income based on income tax is equal to zero. The most absurd thing of all is that our money pays for the industry that earns the most, which does not need subsidies, and which was desperately waiting for one of the politicians to intervene and show their lack of understanding," this analysis states.
The Ministry of Economy reacted, but not to the essential objection, but to the wrong amount of subsidies published by the newspaper "Danas". And Endava spoke up: "Based on experience and positive practice, we believe that the IT community should fight for as many companies as possible (united if they are small) in this sector to compete and receive every possible incentive for development." The IT community should work on introducing new incentives for the strategic development of this area, bearing in mind that everything achieved will have multiple significance for the overall progress of the country (which, among other things, includes a greater inflow of foreign currency, the engagement of unemployed persons through training and retraining programs, an increase in the inflow of money into the budget through the payment of taxes, contributions and the like)."
STATISTICS: The average net salary in September 2016 (without taxes and contributions) was 46.558 dinars, the Republic Institute of Statistics announced, which is a nominal increase of 2,8 percent and a real increase of 3,4 percent compared to August. The average net salary without taxes in the period January-September 2016 is nominally higher by 3,8 and in real terms is higher by 2,8 percent compared to the average net salary in the same period of 2015.
Also, RZS announced that consumer prices in September were only 0,6 percent higher compared to September 2015, and that compared to December of the same year, consumer prices increased by 1,1 percent - still far from the target corridor of the NBS , even if it was lowered already this year. On the other hand, industrial production in September 2016 was higher by 5,3 percent compared to September 2015, and compared to the average of the whole year 2015, it was higher by 6,5 percent.
Industrial production in the period January-September 2016 was higher by 5,2 percent compared to the same period in 2015. The highest growth (15,2 percent) was recorded in the electricity, gas, steam and air conditioning supply sector, as well as in the processing industry sector (3,7 percent). Finally, RZS announces that in the period January-September of this year, the total foreign trade merchandise exchange (in euros) increased by 7,6 percent (7,7 percent in dollars) compared to the same period last year. Exports (EUR 9,92 billion) increased by 10,1 percent, while imports in the same period increased by 5,7 percent (EUR 12,75 billion), which led to a decrease in the deficit by 7,5 percent and increased coverage import by export - from 74,7 to 77,9 percent.
