Despite the assurances that came from National Bank of Serbia (NBS) about inflation being stabilized, food prices in Serbia have risen drastically. This led to it being an interannual inflation in Serbia in June it reached 4,6 percent, which is more than the target corridor of the NBS.
The latest data from the Republic Institute of Statistics brings a dramatic warning: compared to June 2024, vegetables in Serbia have risen in price by 11,3 percent, and fruit by as much as 31,6 percent, which many citizens felt best while they mostly just looked at this year's cherries with mixed feelings of longing and panic.
BIA failed in the fight against price inflation
For NBS, the matter is completely clear and, as usual, defeatist unchanging - the huge increase in food prices is the result of bad weather conditions, first of all frost and hail, and then drought, which destroyed the crop.
Until recently, Prime Minister Miloš Vučević suggested that the state, that is, the government, cannot be held responsible for the fact that food has become so expensive at any cost, who went so far as to announce that no less than the Security and Information Agency would investigate "who all participates in inflating prices in trade chains in Serbia."
"You cannot keep prices that are unusually high or have large margins compared to what is the practice, above all in the European Union, and that no one alive can explain to the citizens why everything is more expensive in Serbia compared to the same products in the EU, and that people understand that it is not because of the customs or tax policy of the state," said Vučević.
He even, unabashedly cynical, appealed to traders not to be reckless in trying to get rich overnight by "pumping" prices.
"Once again, I invite everyone to come to your senses, be fair, be correct, do business, make money, develop your business, just have a measure," said Vučević
He also announced investigations that would be initiated by prosecutors and actions by the Parliamentary Commission for the Protection of Competition, but it is clear from what can be seen in the stores that these were just empty stories.
In the disfavor of heaven
However, not all responsibility can be placed on nature, especially if one takes into account the desperate agricultural policy, which in Serbia is still mostly based on "grace from heaven".
That is why agricultural estates, despite the incredible development of technology, are mostly still without irrigation systems, there is no systematic use of agrotechnical means, but everyone uses preparations according to their own feelings, and all of these agricultural estates, except for those "ceded" to foreigners, are very small.
The problem with the fixed exchange rate
When asked if it was a surprise that inflation jumped to 4,6 percent in June, after it was 3,8 percent in May, economist and former governor of the NBS, Dejan Šoškić, told "Danas" that the monetary policy of the NBS has been giving obvious primacy to maintaining a fixed exchange rate at the expense of targeting inflation.
"Although such behavior of the monetary authorities is contrary to the current Memorandum on Inflation Targeting adopted by the NBS itself, practice shows that inflation is a dominantly secondary goal of the NBS. Therefore, inflation breaking above the upper limit of the inflation target should not be surprising," said Šoškić.
He also stated that, in the conditions of the slowdown in economic growth taking place in Serbia, and without some external shocks, it is difficult to expect higher inflation rates in the coming period.
The very maintenance of the fixed exchange rate that Serbia introduced in 2009 and which forms the basis of the economy can be a double-edged sword in the event of major world crises. Thanks to foreign direct investments, Serbia managed to overcome the crises caused by the corona virus pandemic and the Russian invasion of Ukraine, but the problem is precisely that the crisis was not overcome thanks to the development of the domestic economy.
Serbia is heading towards over-indebtedness.
Due to the lower inflow of foreign direct investments, but also because guest workers - who themselves are living worse in Western countries due to the crisis - have started sending less foreign currency to their homeland, Serbia now has to defend the artificially maintained exchange rate of the dinar as best it knows how, given that it does not have a domestic economy that would support it.
Economists warn that because of this, Serbia is rushing unstoppably into over-indebtedness, which is still invisible precisely because of the fixed dinar exchange rate.
Available data indicate that the public debt reached 2025 billion euros in February 39, and the question arises as to how the debts will be repaid once they come due. Therefore, Serbia will have to take on additional debt for debt repayment, and in the name of interest. It goes without saying that no one will be responsible for that, and the government will continue to try in every way to hide the fact that the country went into excessive debt in order to implement all the plans outlined for the EXPO 2027 exhibition.
