Soskic: “Europe is entering recession and the impact on Serbia will be twofold”

Professor of the Faculty of Economics in Belgrade, Dejan Soskic, has pointed out that the increase in energy prices will not be short-term and the secondary effects will spill over to the rest of the economy through the reduction of economic activity and the pressure on the increase in prices caused by the growth in costs.

In an interview with the portal, he said that it was difficult to assess the wider consequences of the war in Ukraine, but that the developments in the Ukrainian crisis could significantly change the circumstances, including the economic consequences on Europe, and thus on Serbia.

“It is already clear now is that our trade ties with Ukraine and Russia will be, and already are, very difficult or almost impossible to maintain. The provision of alternative energy supply lines is a priority at the moment, but it is also first on the agenda for Germany and other much bigger European economies than ours, and it is a question of how feasible it is in the short term and at what prices,” said Soskic.

His assessment is that Europe will enter a recession and that it will affect Serbia in two ways. “First, through the trade channel, there will be fewer opportunities to sell our goods on the EU market, and it is possible that something we have imported from the EU so far, including raw materials, will be less available and more expensive.

Second, through the investment channel, the recession in the EU, and particularly strong negative effects expected on Germany, Austria and Italy, will force these countries, as significant holders of foreign direct investment in our country, to reduce their investments in Serbia,” said Soskic.

“In addition, the growth of inflation in the world and the expected growth in interest rates will make it difficult for our country to borrow money on the international market and this will reduce the space for capital investments from the budget, which will further affect the downward trend of economic activity in the country.”

These are only the basic and already clearly visible channels of influence on the domestic economy, but additional secondary or tertiary effects should not be excluded, Soskic warned.

(eKapija, 28.03.2022)



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