Preserving the health of the population, maintaining fiscal discipline and creating a new model of economic growth should be on the government’s desk from the first day of its term. One important argument for that is also the fact that the cost of servicing Serbia’s public debt, totalling about 60% of GDP, is higher than the cost of servicing the French public debt, which exceeds 100% of GDP.
Preserving the lives and health of citizens is the main mission of the Government while the health crisis lasts. When the epidemic is brought fully under control, the Government will have to face several important economic challenges, three of which I will single out here: 1) restoring the budget balance that has been destroyed; 2) increasing public investments, particularly in neglected areas like health, education and environmental protection; 3) advancing institutions, i.e. improving the rule of law and curbing corruption.
The Government should reduce the fiscal deficit in 2021 from the current level of 7-8% of GDP to around two per cent of GDP. This would halt the further growth of public debt and restore the country’s fiscal stability. Reducing debts is important because Serbia has to borrow at double the interest rate of developed Europe – i.e. the cost of servicing Serbia’s public debt, which totals about 60% of GDP, is higher than the costs of servicing France’s public debt, which stands at over 100% of GDP. Experiences from the previous crisis (2009) also highlight the importance of quickly establishing fiscal stability after a crisis. Delays in implementing fiscal consolidation (which was only implemented in 2015) led to a decade of low economic growth during which other countries of the Central and Eastern European region (CEE) outpaced Serbia in terms of economic development and the population’s living standards.
It is necessary to finally complete the reconstruction and construction of four large clinical centres and increase the procurement of health equipment in order to make up for the shortfall that Serbia has in relation to comparable countries
In the years ahead there should be an increase in public investment, given that it effectively stimulates economic recovery. A great need for this also exists in particular areas where investment has been insufficient over the years (health, education, environmental protection). The current crisis has shown what a major mistake it was not to place healthcare high on the list of state priorities. It is thus necessary to finally complete the reconstruction and construction of four large clinical centres (funding for which was secured back in 2006) and to make up for the shortfall that Serbia has in relation to comparable countries by increasing the procurement of health equipment.
The new government must reconsider the existing economic growth model, which isn’t sufficiently efficient at present. Serbia is overly reliant on individual projects and foreign investors, and not relaient enough on the systematic development of the domestic private sector. Of course, it is commendable that Serbia has been a record holder in attracting FDI in the CEE region over the previous three years. However, the initiatives of a large number of domestic entrepreneurs are even more important for the sustainable and stable development of any European country. The research that we’ve conducted shows that corruption and the insufficient level of adherence to the rule of law are the main hindrances to the domestic private sector. That’s why the long-term prosperity of Serbia requires the building of institutions that are professionally strong and independent, which must be one of the priorities of the new government.