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The Liquidity of the Economy and Citizens is Key to a Rapid Post-crisis Recovery

Many economic experts are already predicting that the pandemic caused by the Corona virus will be a bigger challenge for the world economy than anything we’ve faced in the recent past, including the 2008 financial crisis. The Government of Serbia has space, primarily in its fiscal policy, to respond to the challenges facing businesses and citizens

What Can the Government Do at This Juncture – Given the Current Economic Situation – To Support the Serbian Economy and Individual Industries?

The eyes of the economy and citizens are turned towards the Government of Serbia, which at this moment must respond simultaneously to the health dimension of COVID-19 and provide clear signals to the economy and citizens regarding economic policy: in the short-term, that relates to the already growing crisis of illiquidity and the way production is organised, while in the medium-term it has to respond to the challenges of preserving businesses and employees. Under conditions in which Serbia has already been confronted by the challenges of mass departures of the workforce, CorD’s interlocutors insist that priority should be given to taking care of the status of workers who are currently employed on any basis.


Aleksandar Marković Metalac Aleksandar Marković
Metalac, CEO

Preserving People is Most Important

It is necessary for us all to bear the burden of this crisis together, especially since we still have a problem with the workforce leaving the country. If we are forced to reduce earnings by 30%, people won’t have a motive to stay in Serbia

What the Government can do at this juncture is to give clear instructions regarding announced measures, including – for example – instructions on how to comply with rules regarding the curfew. These measures should be aimed at maintaining the efficiency of the economy. We are currently witnessing a liquidity shock, so appropriate measures should be taken accordingly. First and foremost, there should be a suspension of taxes and contributions on earnings, for at least the next three months, until the normal pace of business can be re-established. These measures should enable us to be in a position to resume normal operations following the end of this state of emergency period.

Consumer levels can only be sustained if all stakeholders agree to bear the burden of the crisis

When it comes to the retail sector, the recommendation is to suspend the payment of the tax for company expiration, which is otherwise very high, also for a period of three months. Those who provide real estate space should reduce the cost of leasing while the state of emergency is in effect.

That is also in their interest because they will otherwise be left without income. It is necessary for us all to bear the burden of this crisis together, especially since we still have a problem with the workforce leaving the country. If we are forced to reduce earnings by 30%, people won’t have a motive to stay in Serbia. Consumer levels can only be sustained if all stakeholders agree to bear the burden of the crisis.


Professor Dejan ŠoškićProfessor Dejan Šoškić Ph.d.
Faculty Of Economics, University Of Belgrade

Preventing Personal And Company Bankruptcies Is An Imperative

The state should enable liquidity for both citizens and the economy, and prevent both personal and company bankruptcies. This is key to a speedy recovery after the crisis. This combination of subsidies and social assistance is not cheap, but it can be eased through intelligent moves from the domain of monetary policy and regulation of the financial system

The pandemic that has hit us falls into the category of economic shocks that reflect on both external and internal circumstances and impact on both demand and supply in the economic and financial system. A good understanding of the nature of this economic shock is needed in order to provide an adequate economic policy response in each country. As a rule, economic policy can respond in the field of fiscal policy and in the domain of monetary policy. In order to be able to respond, space needs to exist for a reaction, with which the negative effects of this shock can be reduced. In the area of fiscal policy, space to react exists if a country’s fiscal position is relatively solid, i.e. if a country is not already excessively indebted.

In the domain of monetary policy, space to react exists if a monetary policy exists, i.e. if a country is not in a fixed exchange rate regime when space for an independent monetary policy does not actually exist. Alongside that, if a monetary policy exists, it is necessary for it not to already be in the position of so-called liquidity traps, i.e. for interest rates to already be close to zero and for there to be practically no room for a classic monetary policy response. The presence of liquidity traps is widespread around the world, which is the reason why the monetary policies of individual countries have launched nonstandard measures of monetary expansion, so-called quantitative easing (which impacts on reducing the interest rates of riskier and longer-term financing), but are also actively considering other models of non-standard monetary policy responses, which are often referred to descriptively as “giving monetary policy the right of fiscal intervention under crisis conditions”, which actually represent mechanisms for directly securing liquidity by central banks, and do so beyond the banking system, for various end-users (the population, the economy and even the state). Thus, the world has come a long way from standard “textbook” considerations of economic policy and possible state interventions.

It is crucial for people not to be left without income during the pandemic, to preserve law and order, and at the same time mitigate declines in market demand and thus also economic activity

What to do in Serbia? It is realistic to expect a major drop in demand (after the initial, often panicked consumption of the population in shops and pharmacies), a decline in economic activity (on the basis of various factors: broken lines of supplying raw materials, reduced orders from abroad and from the domestic market, absenteeism at work, etc.) and a drastic decline in private investment (both domestic and foreign). State intervention is extremely important under such circumstances. In the domain of fiscal policy, some space exists thanks to the fiscal consolidation carried out in recent years. There would have been even more space if reforms had been implemented, the public sector rationalised and institutions and the legal system strengthened (with which corruption and the informal economy would be curbed, and private investment stimulated). In the domain of monetary policy, under the current model, there is very little real space, primarily due to the fixed exchange rate and the complete absence of results in the domain of dinarisation. If we understood that the widespread use of the domestic currency (dinarisation) and the free management of the amount of domestic money and its price for the needs of the domestic economy, rather than for the needs of the fixed exchange rate, possibilities would be created to use monetary policy, especially in crisis conditions, and today we would have much more “ammunition” to respond and assist under these conditions. As things stand, without a “reset” of the model of monetary policy, there can only realistically be a response in the domain of fiscal policy. Of the many goals set for the state to achieve at this time, the key is to avoid bankruptcies during the crisis. Apart from assistance and the deferrals of obligations related to loans, taxes and leases, special attention should be paid to providing assistance to employees in the private sector who are engaged on any basis (employment contract, service contract, via agencies etc.) as well as to the self-employed. And all of this should be coupled with the obligation of private employers to ensure that no one is left without employment during the crisis. It is crucial for people not to be left without income during the pandemic, to preserve law and order, and at the same time mitigate declines in market demand and thus also economic activity.

The State should, thus, enable the liquidity of both citizens and the economy, and prevent both personal and company bankruptcies. This is key to a speedy recovery after the crisis. The model of state support should be simple and easily accessible. This combination of subsidies and social assistance is not cheap, and will certainly exert pressure on public finances, but it can be eased through smart moves in the domain of monetary policy and financial system regulation. Avoiding bankruptcies is key to a rapid economic and financial recovery after the crisis, and to reducing the negative impact of the pandemic on the country’s economic and financial system.


Goran RodićGoran Rodić
Vice President Of The Serbian Chamber Of Commerce & Industry

Equal Status For Domestic Companies

Considering that the construction industry is the motor of the Serbian economy because it unites over 50 branches of industry, it is necessary for its treatment in gaining jobs through large tenders to be equalised with other bidders

When it comes to Serbia’s construction industry, which is the motor of the Serbian economy, because it unites over 50 branches of industry, the following should be done: the conditions of tenders should be such that Serbian construction operatives can participate equally in gaining work; securing a bank or guarantee fund that will be able to provide guarantees that will serve our construction operatives so that they can use them for obtaining work; domestic operatives with investments that are provided from the budget should be treated as the main contractor or our companies should have partnership relations when foreign contractors are engaged.

The state – as the biggest investor – should introduce financial discipline and sanction all those who are late making payments, or who lead our companies to borrow according to loan-shark terms and cause them to declare bankruptcy

It is necessary to increase liquidity, or for the state – as the biggest investor – to introduce financial discipline and sanction all those who are late making payments, or who lead our companies to borrow according to loan-shark terms and cause them to declare bankruptcy. Dual education should be urgently regulated, because we have entered a major crisis of the tradesmen elite, especially in the area of maintaining infrastructure systems (energy, roadway economy, railways and water transport). Address the integral arranging of the Moravian basin and Corridor 7 (Danube corridor).


Violeta JovanovićVioleta Jovanović
Executive Director, Naled

Only Together Can We Emerge From This Crisis

We propose that the government forms a joint expert group, comprising representatives of institutions, industry, civil society, academia and the international community, to assist the government in coming up with measures that would reduce the dramatic decline in economic activity and rising unemployment

Some of the most important measures proposed by NALED on behalf of our more than 300 members are to temporarily reduce taxes and contributions on earnings, or delay their payment for three months. Additionally, for companies that are recording a significant decline in revenue, it is necessary to offer support aimed at preserving employment and jobs, not less than the amount of the minimum wage. These measures are crucial for small businesses (shops, entrepreneurial workshops, services) and the most vulnerable sectors, which are particularly hard hit and won’t be able to survive without government support. We also propose that the economy be provided with cheap borrowing, in order to overcome the crisis period and maintain their operations with the fewest possible losses, for that to be ensured by state guarantees. In this sense, we welcome the measure already taken by the NBS to introduce a moratorium on repayments of loans and financial leasing, as well as the swift response of the state and measures being taken every day to prevent the spread of the coronavirus.

NALED has already offered assistance to the state because in order to preserve the life and health of the population, it is of primary importance to preserve the vitality of the economy, which contributes to stability in periods of crisis, but also to faster recovery once it ends. That’s why we proposed that the Government form a joint expert group comprising representatives of institutions, industry, civil society, academia and the international community. Its task would be to support the Government in providing responses to questions and to come up with measures that would help reduce the dramatic decline in economic activity and rising unemployment.

Naled certainly stands available and is trying, in cooperation with its international partners, to redirect donor funds towards resolving the health and economic consequences of the pandemic

This group should also analyse the effects of the package of measures prepared by NALED’s expert team, which have already been delivered to the Presidency, the Government of Serbia, the National Bank and the Chamber of Commerce & Industry, with the indication that they will be adapted to suit the further development of the situation.

Among the key measures of NALED’s initiative are proposals to introduce extended maternity leave and vouchers for working parents to hire childcare assistance. Then there’s the payment of one-off financial assistance to vulnerable companies and citizens who lose their jobs. Our focus is primarily on small players in the economy, as the most vulnerable, so our new proposal is to set up a contact centre for inspections, in order to answer the numerous questions and assumptions of the economy and citizens.

Another of our initiatives is to establish a financial support fund for the cities and municipalities hardest hit by the pandemic and to encourage cashless payments, which are safer to health. We also propose the preparing of public works to engage vulnerable groups and encourage local development following the end of the epidemic, as well as expanding the scope of regulations for simplified electronic engagements of seasonal workers in areas that will be particularly hard hit, such as tourism, home assistance, childcare, courier jobs etc.

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