Serbia can grow up to 7% – Economy

This is significantly less than what the state or even the IMF predicts. However, even with this assessment, Serbia is significantly above the Western Balkan region, whose average decline is 4.8 percent this year.

This report also had an introduction in the form of a statement from the NBS, which questions the intentions of the World Bank and the EBRD, given that both gave more pessimistic forecasts for Serbia than the state expects.

Stephen Ndegwa, head of the World Bank’s office in Serbia, talks to Danas about the reasons for the disagreement.

The World Bank’s projection is significantly more conservative than the projection of the Government and the NBS (-1%) and the IMF, which corrected its estimate to minus 1.5% a few days ago. Where do so many differences in estimates come from?

Our projections, in principle, are based on a more conservative assessment of the global recovery and were made somewhat earlier than others because data for all the world’s economies are being collected at the same time.

We expected the recovery to be slower, and since Serbia is highly integrated into the world economy, what is happening in international markets is also affecting its economy. It is the main driver of our projections.

We are particularly aware of the extreme uncertainty with respect to all countries, so we believe that there is a more conservative assessment, of course with respect to other projections, including the government and the NBS. We constantly collect data that is published and the projections will be updated next time.

The important thing is that we work together on how to stimulate the economy, to agree on what must be done to protect the lives and standard of living of citizens in times of turmoil.

We are all on the same side on the reforms, on the new growth agenda that we recently discussed with the President, as well as on the “green growth” agenda and the investments in which we are involved. For us, the differences in projections are a matter of analytical differences, but the foundations of the Serbian economy remain as strong as the government’s commitment to reform.

The National Bank issued a statement on the projections of international financial institutions, including the World Bank, where it asked if it was about objectivity or some other intention. So what are your intentions?

We pride ourselves on our objective and technical analysis. It is important for us to provide credible evidence to the global economy, as well as individual economies, to agree on key reforms and areas where governments need assistance.

That is our intention. We are very focused on the growth of the Serbian economy, prosperity and especially on reducing poverty.

I think it is very important that we do not forget clear common goals and be ambitious, and this is how Serbia can achieve faster growth than it has been so far, a growth of six, seven percent that would allow to double the income in a generation.

Perhaps you perceived that statement as pressure to perhaps change the projection?

Absolutely not. We have extensive conversations with the government, we often share different analyzes and discuss solutions and policies.

It is a sign of strong and constructive cooperation and I did not experience it as pressure, more as a debate on various analyzes.

There was no request not to publish a screening, nor to change the numbers. After all, everyone is constantly checking projections as new information and data arrives. This is a specific year and it is much more difficult to make projections.

And with a more conservative assessment from the World Bank, Serbia will emerge from this crisis much better than most European countries. What distinguishes us?

The Serbian economy has entered a crisis with solid foundations. It went into crisis after two years of budget surplus and after 4.2 percent growth last year.

Then there was a crisis with sound finances, and in the crisis the aid package was the largest in the region, it was productive and mostly self-financed because government deposits were important.

We do not expect this year’s budget deficit to last long, but it is an unequivocal phenomenon. This is due to many reforms that have been implemented in the last five to seven years, beginning with the fiscal consolidation from 2014 to 2018.

If it weren’t for that, Serbia wouldn’t be able to bring that aid package to the economy now. This speaks in favor of the need to implement fundamental reforms in the coming years.

In last year’s new growth agenda, we established what reforms should be implemented to achieve growth not of one, two or three, but of six, seven percent.

We believe that Serbia is ready for that. Serbia is no longer in the league of countries that grow at three percent, but it can move into the league with a growth of five, six or seven percent.

For me, the pandemic is a tragedy, in addition to the fact that lives were lost, and also because Serbia was detained for this year to achieve the goals of the new growth agenda.

Where do you see the risks for the Serbian economy this year and next?

The risks that accompany the Serbian economy are similar to those of other countries in the world in the pandemic. It largely depends on what the foundations of the global economy will be like, of course the local one, and whether we will find a vaccine in the near future.

For this year, the risk for Serbia is that the package of aid to the economy, which was very large and mostly ended in September. Now we need to see how companies operate in a situation without that help.

And the internal risks?

We have been talking about internal risks for years. These are problems that Serbia has yet to solve. It is about registering a company, facilitating business, access to financing especially for SMEs, changes in public companies.

These factors can limit the effect of any stimulus package. We consider the government’s position on the continuation of the reform positive. The president mentioned a growth of six percent. That is the true medium-term objective. We talked with them about new reforms, public companies …

Could this fiscal deficit of 7.6 percent of GDP, as you state in the report, as well as the potential liabilities with public and state companies (the report says Air Serbia and Telecom) be a problem in the next period? How much deficit would you recommend next year?

First of all, the most important thing is to save lives and save the economy. There is no point in having a balanced budget while people die.

In pandemic and crisis conditions, it makes sense to spend as much as you need to save lives and support the economy.

On the other hand, there are risks. The risk is that the growth of consumption does not stop. Our overall recommendation is that aid be limited and targeted.

In Serbia, state aid has been completed and, to consolidate finances, the budget needs to be carefully controlled. We are not concerned about Serbia’s ability to do that, because it has already proven itself.

The World Bank does not recommend a certain amount of deficit, and when it comes to potential liabilities, care must be taken, especially with state-owned companies.

How do you rate the reform of state-owned companies so far?

We have seen progress in the last five to seven years, but there is still work to do. We have seen progress in the reform of Serbian railways, we support the privatization of Komercijalna Banka, which should be completed by the end of the year.

In general, the reforms are progressing, although more slowly than we would like. For example, we always point out that EPS corporatization is slow, but there are also other companies. We have pointed out before that there should be more market discipline in state companies, which should behave like other companies in the market.

Second, the election of the leaders of public companies is also important. The election of the director must be competitive and transparent, as established by law.

It is important to continue with the public company agenda and when it is implemented, the benefits will follow.

The new growth agenda received several comments, some of which were that it was unworkable or simply a wish list.

It is important that everyone is focused on what needs to be done in the medium term to achieve prosperity.

Imagine Serbia in that five to seven percent economic growth range and ask yourself what needs to be done to get there. This is a key question, not whether the percentage is estimated up or down. We have set it in the new growth agenda and we must not allow temporary shocks to divert us from that path. So the next generation would have doubled their income.

And there are things on the agenda that must be done to achieve that growth. This is not a wish list. I think Serbia can do that.

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