Serbia’s economic growth can be encouraged by increasing public investments in infrastructure, rather than by increasing public spending, through wage and pension growth – according to the members of the Scientific Society of Economists of Serbia (NDES).
At the conference “Economic Policy of Serbia in 2019” held at the Faculty of Economics in Belgrade, President of the Fiscal Council, Pavle Petrovic pointed out that close to 300 million euro of investment funds could be allocated from the state budget, without compromising the 0.5 percent deficit.
“Public investments, not public consumption, have a strong impact on the growth of gross domestic product (GDP), increase in employment and overall economic activity,” Petrovic estimated.
He added that insufficient investments were made not only in road, rail and utility infrastructure, but also in health care, and that public companies were also not investing enough, citing the example of the Serbian state-owned power company, Elektroprivreda Srbije (EPS), which invests a third less than the depreciation amount.
He said that the government had missed out on the opportunity to invest 200 million euro of state budget surplus in roads and railways, instead in military equipment, and 100 million in communal infrastructure and environmental protection.
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Professor of the Faculty of Economics in Belgrade, Milojko Arsic, said that investments are the key and direct factor of economic growth.
“Growth is also fueling innovation and technological progress resulting from investments, so it is unclear why the prime minister announced the abandonment of an economic policy based on investments and a transition to an innovation-driven economy,” Arsic said.
He also said that one of the reasons for low investments in Serbia was insufficient savings of citizens, which are two and a half times lower than the average in the countries of Central and Eastern Europe, as well as the inadequate institutions and economic environment, which provides foreign investors with various benefits and subsidies.
Economist Ljubomir Madzar pointed out that “Serbia looks like a paradise for lunatics because the situation is being portrayed much better than it actually is”.
“We keep hearing every day that Serbia is a leader in this or that, but our economic growth rate is actually almost the lowest compared to the neighbouring countries”, said Madzar.
“Foreign investments have good and bad sides, and it’s bad that they are contracted by inexperienced people in power which is why investment contracts often have secret clauses that both foreign investors and local authorities want to see in the contract. That is why such contracts are most likely to be corrupt,” Madzar warns.
Economist Ivan Nikolic pointed out that the level of investments could not grow to the desired 25 percent of GDP without investments in housing construction, adding that the investment rate is not a guarantee for economic growth. “In Serbia, the investment efficiency is 17.1 percent lower than in the EU,” Nikolic said.
Professor at the Faculty of Philosophy in Belgrade, Ognjen Radonjic, said that “Serbian science produces a lot more than investments”, but that, if the law on science and research is adopted, it will have detrimental effects on the development of scientific thought.