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The professor of the Faculty of Economics, Dejan Soskic, points out that if Serbia already lives in the conditions of a fixed exchange rate, it should not allow a growth of wages faster than productivity, because otherwise it will be endangered the competitive potential of the national economy. He believes that a significant improvement in the standard of living of citizens will not be soon, because Serbia is increasingly stratified as a society, with large differences in the income of citizens, which the authorities should seriously put under scrutiny, in terms of tax system and social benefits.
“If we already live in a fixed exchange rate, then we must not allow our wages to grow faster than productivity. This is very important so as not to endanger the potential of the national economy to gain competitiveness and thus move towards sustainable development. “. Šoškić scored in Dan live on TV N1.
“We must not increase wages on average faster than productivity growth, because that leads to a unit of labor input being comparatively more expensive and unattractive for economic activity, and thus we will position ourselves on the side of the countries that are better in them. We need foreign direct investment that increases the export potential, which will influence Serbia to finally balance the trade balance and finally get to the ‘green branch’ “, adds Šoškić.
He considers that Serbia has no “special cause for satisfaction” due to the somewhat smaller economic decline compared to other countries, because, as he points out, it is a consequence of a different structure of our economy.
“Countries that are less developed and have an economic structure oriented towards agriculture and that do not depend on tourism will not experience a drastic decline in economic activity, and Serbia falls into that category. Those countries should not expect a high rate of economic growth. next year, precisely because it is not there has been a decline this year, a reduction in the base as it could have been and as it is in some other countries, ”says Šoškić.
He recalls that this year Serbia plans to run one of the largest budget deficits in history, which is “much larger than the problem years of 2014 and 2015, and despite a small drop in economic activity, which amounts to one to three percent. , a fiscal deficit of nine percent of GDP is expected, which is a very worrying figure. “
When asked if the country’s additional borrowing this year is justified, Soskic says it is in part.
“Serbia has carried out several waves of aid to the economy to maintain economic activity and aid employment. There have been a number of justified measures, including state guarantees for loans to the economy. However, the linear delivery of money to all citizens and wage growth in the public sector are problematic measures without which it was possible and necessary ”, points out the economist.
He adds that it is important to “focus on next year, be conservative in our growth projections and try to curb the growth of debt relative to GDP next year, which we increased by ten percent this year, despite revenues. extraordinary, like the concession of the airport “. “.
Traditionally higher wages in the public sector than in the private sector: an anomaly
When asked about the announced increase in salaries in the public sector, he said that it must be extremely restrictive and support sectors that have been neglected for years: health, education, research, development, science.
“Salaries in the public sector are traditionally higher than in the private sector and that is an anomaly. We must be very conservative and postpone or completely abolish activities related to raising wages next year, until economic activity resumes and we achieve productivity growth, as we would not overspend and put Serbia back on the line. unsustainable path of public debt “, warns Soskic.
“If you have a non-competitive economy, which is becoming less and less competitive as wages grow faster than productivity and the exchange rate is fixed, then you have a tendency to increase the trade deficit, which can be partially covered with foreign investment, but not indefinitely, and donations abroad will have to be covered with new loans, leading to lower productivity and higher debt, “he added.
He says that the fact that the interest rate for Serbian loans this year is significantly higher than last year shows the deterioration of our position in the international market.
“We are now reaching a position where the global financial market will have us increasingly under scrutiny and will analyze to what extent we will be able to pay our tax obligations. The first sign is what we already experienced in May: the increase in rates. It is a very serious sign that we do not have much space here, certainly not for some additional expenses in the public sector, especially not in the field of wages, ”emphasizes Šoškić.
But, he adds, despite the fact that we must be very restrictive in spending, the State should not neglect investment in infrastructure development, which is necessary for economic development, and that more should be invested in education, health, science and technology. .
But keep in mind that higher spending in these areas must be accompanied by reforms in these areas, which means that not only is more money being spent, but that you get a higher level of quality for that money. An educated and healthy workforce is the basis for productivity growth, they are very important development things, ”he says.
Necessary environment for investments: rule of law and absence of corruption
It states that Serbia lacks domestic private investors, for which a suitable environment is necessary: the rule of law, the absence of corruption.
“That is what Serbia lacks most. National businessmen obviously do not see good enough conditions to do business,” Soskic said, adding that the judicial system must be impartial and free from corruption.
“If the perception of corruption in Serbia were at least at the level of other Balkan countries, we would have at least one percent more economic growth every year,” he said.
When asked if and when an improvement in the standard of living of Serbian citizens can be expected, he assessed that there will not be a significant improvement soon.
“Serbia is stratifying itself as a society, in recent years we have noticed a huge discrepancy in the income of citizens. Serbia must subject it to serious scrutiny, in terms of the tax system and social benefits. We have become a society of inequality. And that’s a problem that needs to be seriously addressed. Let’s have fun, “concludes Šoškić.
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