We knew that Serbia had high inflation, and that was also told to us by the President of Serbia, Aleksandar Vučić, when he listed the huge percentages and dates for whom and when and by how much salaries and pensions will be increased, how much bread will be cheaper and what the age requirement is the children would receive 10.000 dinars.
Inflation in April was around 15 percent, and the plan, as the president said, is to drop it to eight percent, so that next year they will fight for it to drop to three, three and a half, or four percent.
All these "important news", as j Vučić called them a few days earlier on the terrace of the Presidency, he announced right after the public heard another one from him - that we are definitely expecting extraordinary parliamentary elections.
What's next for us?
And how much can these measures really help in reducing inflation and how economically justified are they?
For Dejan Šoškić, professor of the Faculty of Economics and former governor of the National Bank of Serbia, neither can be considered justified, nor will they contribute to reducing inflation.
"This measure may be politically popular and some may think it can boost domestic demand in the short term to support economic activity in the country." However, considering the structure and weaknesses of our economy, in practice this measure will mostly only increase public expenditures and public debt and stimulate inflation," says Šoškić for the "Vremena" portal.
Moreover, this will only prolong the fight against inflation.
"The greater part of public expenditures will be transferred to consumption, instead of investments, the public debt and future expenditures from the budget for financing obligations based on the public debt will increase, and the fight against inflation will last longer and will require an even more restrictive monetary policy with further negative effects on economic growth in the country", believes Šoškić.
Is there money for the president's promises?
The list of what Vučić promised is not short at all. Thus, from September 1, salaries in education will be increased by 5,5 percent, from December 1 another 10 percent. The pension from October 1 will be higher by 5,5 percent, and from January 1 by 14,5 percent.
Nurses and medical technicians will receive a 1 percent salary increase starting September 5,5 and an additional 10 percent in December or January. Children up to the age of 10.000 will receive RSD 16 each, registration will be from August 20 to September 15, and payment will be made around September 25.
Another 100.000 vouchers of 5.000 dinars each will be distributed for holidays and travel in Serbia.
"We hope to have the strength for an increase of around 11 percent for doctors, the army and everyone else in the public sector," said Vučić.
The price of "Sava" bread will be reduced from 57 to 54 dinars.
The question arises whether Serbia has the money for everything that Vučić announced.
Professor Šoškić states that Serbia has raised its public debt from a level of around 14,5 billion euros in 2012 to a level of over 33 billion euros at the end of 2022, and that, when you look at all the indicators, there really is no money for everything announced.
Serbia has not reformed the economy
"If Serbia had carried out the necessary reforms, developed and strengthened the institutional environment and raised the level of investments in the tradable part of GDP, our economic growth rates would spontaneously lead to a sustainable increase in the income of our population. However, in the past decade, Serbia has not fundamentally reformed its economy, nor has it recovered in terms of significant growth in its competitiveness. This is confirmed by the fact that in all international comparisons regarding corruption and the strength of institutions, Serbia has been regressing in the last decade, and regarding the average annual rate of economic growth, in the last ten years we have been regressing in relation to the countries of Central and Eastern Europe, but on average also in relation to the world as a whole. It inevitably follows that we don't really have the money for such measures and that they will affect the further growth of the country's public debt, i.e. of all of us as taxpayers, and that increase in public debt must now be financed at higher, that is, less favorable, interest rates", explains the interlocutor of "Vremena".
In addition to all that, as stated by Dejan Šoškić, everything that was announced and it is not the competence of the President of Serbia.
"At the same time, it is a fiscally expansive measure in conditions of high inflation and relatively high and growing public debt of the country," says Šoškić. "Therefore, I believe that from the perspective of macroeconomic effects, such a measure is undesirable and inadequate, both in terms of fiscal balance in the conditions of declining economic activity and worsening conditions for financing the country's public debt, as well as in terms of inflation and its containment and bringing it down to a lower level."
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