The Serbian economy fared better in the crisis than many EU and Balkan countries, and the world is facing a bigger recession than in 2008

The Serbian economy did relatively well during the crisis caused by the coronavirus pandemic compared to other countries. In the coming period, the economic recovery will be stronger and growth prospects will improve if Serbia seizes the opportunity to inject new energy into the economy by implementing major reforms, says the head of the World Bank office in Belgrade, Stephen Ndegwa , in an exclusive interview with Kurir. That is, it points out that the decline in Serbia’s gross domestic product (GDP) will be significantly less than in the Western Balkan countries and the European Union, while adding that the Serbian economy could return to the previous growth path in 2021.

After several years of growth, the World Bank forecasts that Serbia’s GDP will fall by around three percent this year. How risky is that for the Serbian economy?

– This year, Serbia will have the smallest drop in economic activity in the Western Balkans of minus three percent, which is much less than expected for the EU (minus 8.4 percent) or six Western Balkan countries (minus 4.8 percent). This is, above all, the result of a generous package of tax incentives, which is comparable to packages in much richer countries. Budget support for the economy and citizens is already at a level of around 13 percent of GDP, which is comparable to much richer countries. This type of fiscal assistance was made possible by a good starting position: years of fiscal consolidation have helped the government reduce public debt in recent years and increase its deposits. Furthermore, activity in some sectors was better than expected, for example in agriculture, which prevented a deeper recession this year.

When can we expect the recovery of the Serbian economy and the resumption of GDP growth?

– The recovery of the economy is expected next year. Of course, the development of many events is not under the control of Serbia, but its economy should soon return to its previous growth trajectory. For that to happen, the government needs to implement an ambitious set of reforms defined in Prime Minister Ana Brnabić’s presentation, as well as in the recent World Bank report “New Agenda for Economic Growth in Serbia”. Only reforms can allow the Serbian economy to emerge from the crisis stronger and better prepared for new challenges.

The world economy is going through a growing crisis, that is a fact. Where does Serbia stand in comparison to the Western Balkans, and where does it compare to the EU and beyond?

– Serbia did relatively well compared to other countries. In the next period, the economic recovery will be stronger and the growth prospects better, if Serbia seizes the opportunity to breathe new energy into the economy through the implementation of major reforms. Some reforms are long overdue, such as the reform of state-owned companies: some need privatization and corporatization, and others need better governance. The second set of reforms refers to preparing the economy for the future and is related to “green growth”, which leads the country to clean energy, better waste management, and environment-friendly agriculture. The government’s commitment to these reforms going forward is commendable.

How do you see state aid to the Serbian economy during the coronavirus pandemic?

– All governments are trying to provide support to businesses and citizens. The response from the Serbian government was swift and complete. The Kovid 19 pandemic has caused an unprecedented health and economic crisis, and we are all still learning what the best options are to help citizens and the economy. One of the lessons for Serbia is that better targeted assistance is needed. Budgetary resources are exhausted and the support provided should be more selective. And in that part, we have good news: when the new social card registry is established and operational, it will become a valuable tool that the government will use to provide assistance to those who need it most.

In the end, does the world expect an economic crisis greater than in 2008?

– As for the depth of the recession, unfortunately yes. The expected decrease in economic activity in the world for this year will be greater than during the global financial crisis of 2008-2009. Furthermore, unlike ten years ago, this economic recession was accompanied by a health crisis, which brought great sacrifices. We hope that the vaccine will be made soon and that we can return to normal life and work so that recovery can begin in 2021.

EVALUATION

No public debt problem

According to your estimates, does Serbia have a potential problem with public debt?

– I would like to immediately underline that, although there has been an increase in public debt this year, there is no public debt crisis. We believe this increase was exceptional, as the Government had to increase budget spending this year. And we have seen it in countries throughout Europe and the world. Going forward, we expect the Government to remain committed to a responsible fiscal policy as it has been in recent years.

Kurir.rs/ Boban Karović Photo: SB

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