The projected average salary of €1,150 in December 2026, announced by Aleksandar Vučić, may sound like a significant leap, but economist Milan Kovačević explains why it’s not quite as straightforward as the Serbian President suggests.
In an interview with TV Happy, Vučić stated that Serbia no longer has low-cost labour and added that by December 2026, the country’s average salary would reach €1,150, or around 136,000 dinars.
To put this in perspective, the average salary in December 2023 was 95,093 dinars, which implies Vučić is promising an increase of about 43% over three years.
According to the latest data from the State Statistics Office (RZS), the growth in gross earnings between January and August 2024 compared to the same period the previous year was 14.7% nominally, or 9.3% in real terms, while the average net salary increased by 14.6% nominally and 9.2% in real terms.
However, there is always the question of how accurately the average salary reflects the actual standard of living.
For example, the median net salary in August 2024, the latest month with published data, was 75,575 dinars. This means that 50% of employees in Serbia earned up to this amount.
Kovačević notes that while it’s not impossible for the December average salary to reach Vučić’s target, this figure would be a “one-off” occurrence.
“When he talks about salaries, I just tune it out,” Kovačević told Nova Ekonomija.
He explains that there are several factors that “distort” the calculation of the average December salary.
To begin with, Kovačević points out that it is often more advantageous for business owners to increase bonuses at the end of the year than to pay out dividends due to lower tax rates, which inflates the average salary in statistics.
There are also seasonal fluctuations, with some private companies paying a 13th salary at year-end, and it’s possible that Vučić may be planning something similar for the public sector, Kovačević says.
“He has a lot of leeway to manipulate these figures,” he adds.
Kovačević also stresses that inflation must not be overlooked when discussing salary growth, as “people are not only interested in receiving a higher income but also in how much more they can purchase with that money.”
Indeed, when inflation is taken into account, salary increases in recent years appear in a different light.
According to data from the State Statistics Office, annual inflation in September 2024 was 4.2%. A dinar valuation calculator based on inflation, created by the economic consultancy Cekos In, provides an even clearer picture.
According to this calculator, 100 dinars from five years ago is equivalent to 140.9 dinars today, indicating a 29% drop in the dinar’s value.
Commenting on the projected average salary for December 2026, Dragoljub Rajić from the Business Support Network says that the key question is what the inflation rate will be. Rajić reminded Nova Ekonomija that Serbia and Hungary have had Europe’s highest inflation over the past two years, which has eroded nearly all economic growth. “If you look at the growth in the economy, convert it into dinars, and see how much inflation has increased in dinar terms, you’ll find that there was effectively no growth for two years,” he said.
According to Rajić, inflation must stabilize within the next year or two, and the economy will feel the effects of these inflationary trends over that period.
Milan Kovačević notes that over the last nine years, the population’s purchasing power has barely increased. “If you compare 2014 and 2023, considering the rise in salaries against inflation, you’ll see that purchasing power has practically increased by only about 20%,” he explains. He adds, “Every time salaries in the public sector increase, it means a rise in costs for goods and services that citizens and businesses pay for in the public sector.”
(Nova Ekonomija, 07.11.2024)