Economists: Early election would cost 20mln euro and would postpone reforms

Holding early elections in spring in Serbia would leave unfavourable short-term and long-term consequences for the budget and economic growth in the country – most economists agree.

However, a Belgrade Faculty of Economics professor, Milojko Arsic says, for the Beta news wire, that “the elections would have no significant impact on economic growth this year, which will range from 3.5% to 4%, because the election campaign is likely to last very shortly, and the economic policy for this year is already adopted.”

“Since it is certain that the same political party, that is currently in power, will win the early elections too, this would have negative long-term consequences on the economy, because it would mean a continuation of the form of government that has existed for six or seven years, and which accomplished rather poor results,” said Arsic.

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To illustrate this claim, he said that, from 2012 to 2018, Serbia’s economy achieved worse results than other countries in the Central and Eastern Europe (CEE).

According to him, Serbia’s economy lagging behind the CEE countries cannot be justified by fiscal consolidation or unfavourable weather conditions, since other countries, in this period also implemented fiscal consolidation and were faced with the same bad weather.

“The main reason for Serbia’s economy lagging behind lies in having inadequate institutions, i.e. the low quality regulations, the widespread practice of non-compliance, the absence of the fight against corruption, insufficient political stability and other reasons,” Arsic said.

According to him, Serbia is at the 105th place in the world on the World Bank’s list of the quality of governance, “which is a very poor ranking for a European country.”

Arsic argues that the poor governance of the state and the economy contributes to a negative selection of civil servants and public enterprise employees, because instead of competence, dedication and honesty, they are employed because of their political affiliations and loyalty to a certain political option.

Arsic also says that snap elections would be held in extremely unequal conditions, which the opposition would likely have boycotted, which, in turn, would result in a longer period of political instability, which is not favourable for economic growth.

Chief Economist of the Fiscal Council of Serbia, Danko Brcerevic, told Beta that the immediate effect of early elections would be a budget cost of around 20 million euro.

“This expenditure will not jeopardize the stability of the budget, but these are very significant funds,” Brcerevic added.

The long-term consequences of early elections are, according to him, postponing the creation of a salary-band system that should have been completed in 2018. However, it has been postponed for 2019, and if the elections do take place, the current uncertainty will continue.

In addition, Brcerevic claims, the reforms in public companies, primarily in the Electric Power Industry of Serbia (EPS), will be postponed, should the early elections take place.

“There has not been any significant progress in the reforms in that state enterprise so far,” Brcerevic said, adding that the cutting down on the number of employees in the public sector will also be left for another time.

Brcerevic goes on to say said the elections would also postpone reforms in health care, education and other sectors.

“Also, there will be negative consequences for the business environment, and since Serbia already has low economic growth, it is necessary to increase private investments, which have otherwise been quite small. For this, we need a predictable business environment,” Brcerevic concluded.

(Danas, 23.01.2019)

This post is also available in: Italiano

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