Kovacevic: “The decline in Serbian GDP will be greater than forecasted by the government and the IMF”

The foreign investment consultant Milan Kovacevic said that a crisis, such as that caused by the COVID-19 pandemic, has rarely affected both production and consumption.

Most of the previous crises were caused either by a reduction in production or consumption, as well as financial reasons.

“Now, it is difficult to assess the overall consequences, the extent and depth of the crisis because it is not yet clear how long the pandemic will last,” Kovacevic said, adding that unemployment is likely to be high and the cost of labour will decrease.

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According to him, many people are deceiving themselves and think that the economy will recover easily after the end of the pandemic because the problem has not only occurred in this sector but also in the health care sector.

“The economy does not recognize in which segment the problem has arisen. What could be a somewhat mitigating circumstance is that service sector does not have a large share in the gross domestic product (GDP) while agriculture, which has not been hugely affected by the crisis so far, does,” he adds.

Kovacevic estimated that the decline in GDP will be greater than the national government’s forecast (1.8%) and even greater than the International Monetary Fund’s (IMF) projection (3%).

“The damage will be somewhat reduced by the decline in travelling and foreign currency outflows, but the big question is whether remittances from abroad will remain the same,” he goes on to say.

“The government keeps forgetting that under such conditions one should save money, not give away money, as it has already promised to do,” Kovacevic said, and it will certainly be necessary to review the budget of Belgrade and the other municipalities.

“The idea of giving each adult Serbian citizen 100 euro is a destructive one,” Kovacevic argues. “We haven’t been told what exchange rate will be applied to disbursement of those 100 euro, nor what will happen to the money that some citizens will refuse to claim,” Kovacevic concludes.

(N1, 27.04.2020)


This post is also available in: Italiano

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