“The cause of the negative trends in the Serbian economy is a combination of internal weaknesses, such as the decline in EPS’s electricity and coal production due to poor management of the company and external factors, such as the slowdown of the economy in the European Union, the decline in automobile production and Kosovo applying tax on Serbian goods”, said Milojko Arsic, Editor-in-Chief of the Quarterly Monitor, at the presentation of the Monitor’s latest issue at the Faculty of Economics in Belgrade.
“The main problem of the economy is the growth that is lower than the average in the countries of Central and Eastern Europe. The slowdown of the economy cannot be solely attributed to the slowing down of the EU’s economy. In the first three quarters of last year, Serbia’s quarterly GDP growth was around 1%, and in the fourth quarter 0.3%, which is about 1.2% annually. No CEE country has recorded such a slowdown in the last quarter, which indicates that problems are internal. The state could solve the problem of poor management of EPS, but instead it minimizes the extent of the damage or even denies it,” Arsic added.
He pointed to the need for state anti-crisis measures, given that there is a fiscal space between the budget surplus and a moderate deficit of up to 1% of the GDP that would not jeopardize public debt.
“Public investments, as well as investments in science and innovation, have the greatest effect. The state should give up dividends from public companies because it is absurd to take money from public companies for investments funded from the budget surplus”, said Arsic, adding that that might have been prudent in 2014 and 2015, but not now.
Arsic points to the substantial growth of the deficit in the balance of payments in the last two years, primarily due to the dinar appreciating against the euro.
“The growth the trade deficit cannot be explained only by the import of equipment needed for investments since other CEE countries with high growth rates also had a healthy balance of payments or have even recorded a surplus. The dinar appreciating 6% dinar against the euro in the last two years is not based on economic strength, because, at the same time, our productivity has been stagnating. In the CEE region, only Serbian dinar, Croatian Kuna and Romanian lei appreciated against the euro, while all other currencies depreciated”, Arsic warned, pointing out that the NBS should intervene to allow the dinar to depreciate against the euro.
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