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In the first eight months of this year, the republic’s consolidated budget deficit is 344.6 billion dinars or 2.9 billion euros, after August’s deficit of 20.9 billion dinars. The country is thus slowly approaching the expected but record deficit of three billion euros or seven percent of GDP.
Photo: Aleksandar RoknicAccording to IMF estimates, this will be an above-average deficit in Central and Eastern Europe, with Montenegro, Romania, Lithuania and Estonia ahead. According to the analysis, the deficit is higher than the average for the region, approximately at the 600 million euros that were spent on the distribution of 100 euros to each adult citizen.
Such a high deficit is the result of a 48 percent increase in budget spending in the first seven months and a five percent drop in budget revenue. The largest drop in income was recorded in corporate income tax at 27 percent, non-tax income at 14 percent and the most important tax on the generosity side, VAT at 2.7 percent. hundred. On the other hand, it is interesting that revenues from excise and customs have increased. In August, there were significant income tax payments, 18.9 billion dinars, as the deadline for payment ended this month.
On the cost side, transfers to the health and pension fund increased by 120 percent, subsidies by up to 184 percent (this includes measures to help the economy), and interest payment costs were reduced. , repayment of the principal of the guarantees and, curiously, social protection. The positive thing about this year’s budget is that no savings were achieved in the execution of public investments, which in the first half of the year were 27.9 percent higher than last year and reached 4.5 percent of GDP.
What remains to be seen is what the budget will look like for next year. Finance Minister Siniša Mali spoke with the International Monetary Fund mission, which will be in Serbia until October 16, and according to yesterday’s announcement, it seems that next year’s budget will be more focused on stimulating economic growth than to save.
“Serbia intends to continue capital investments, which will also affect economic growth.” In this sense, it is important to adopt the methodology for capital projects, which is precisely one of the successes of the arrangement with the IMF. As you said, four roads are currently being built and a contract was signed for the Frushkogorski corridor today. Mali said it hoped that Serbia would achieve the fastest possible economic growth next year, despite the many challenges in the world, “announced the Ministry of Finance, along with the Minister’s message that there is fiscal space for growth of the wages in the public sector.
To know what the development budget means in terms of deficit, we will have to wait to see the budget proposal, but the Fiscal Council believes that a deficit of two percent of GDP next year would be the correct measure because it would slow down debt growth. public that will reach this year. and skip 60 percent of GDP.
According to the Council’s assessment, such a deficit would halt, and probably reverse, the growth of the share of public debt in GDP and, at the same time, would not undermine the economic recovery. According to the analysis of the Fiscal Council, this level of deficit would be achievable, because most of the measures that increased the deficit in 2020 were temporary and will not be repeated in 2021.
Danko Brčerević, chief economist at the Fiscal Council, points out that if there is no crisis with the pandemic again, the council’s recommendation is to remain at a two percent deficit next year.
“If there are no extraordinary circumstances, it is a deficit that will stop the growth of public debt. Public debt of 60 percent of GDP is too high for us because interest costs are higher for us than for other European countries and we cannot compare ourselves to the West in terms of debt. We must not repeat the mistake of the global financial crisis when other countries immediately entered fiscal consolidation, and we lost time until 2015, and then we had to cut wages and pensions, and we also have a period of low growth, ”Brcerevic says.
Long recovery
In her speech to the public two days ago, Kristalina Georgijeva, the president of the IMF, called the next period a “long rise”, noting that the world economy will not return to the old way so soon. His key message is that, although the world economy is returning from the abyss of crisis, the problems are far from over. The world expects a long, uneven and uncertain recovery. He estimated that the economic situation is better than initially thought, thanks to the intervention of states of up to 12 billion dollars. This, in turn, has led to a rise in public debt to 100 percent of global GDP this year, which inevitably means that some countries have become more vulnerable. On the other hand, unusual for an IMF leader, he explicitly called on governments not to rush to abolish measures to help economies and incentives to create jobs.
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