The resignation of Prime Minister Vučević represents a precedent in Serbia’s political life, marking the consequences of a deep political crisis, the resolution of which is not yet in sight
In stable democratic countries that have high-quality and independent institutions, the collective resignation of a government and holding of extraordinary parliamentary elections don’t have a dramatic impact on the investment climate and economic activity. There are countless examples of this – from Italy and Belgium, to more recent examples in Germany and France. The situation is different in Serbia. Our institutions aren’t sufficiently developed, their quality is questionable and their independence from the executive branch is uncertain. However, despite the frequent extraordinary parliamentary elections and institutional limitations of the past, the impact on the economy has been minimal. This is because there’s been a clear parliamentary majority since 2012, with political stability never brought into question. The decline in economic activity that was particularly evident between 2012 and 2015, but also in 2022, resulted from economic policy errors and not frequent government changes.
It is important to note that we don’t have a longterm development strategy and that key decisions in our country are often made ad hoc, regardless of whether we have a regular or technical government, without prior analysis of the socioeconomic impacts of such decisions. Moreover, there are no clearly defined industrial policies and the current fiscal policy is often adjusted to the immediate political needs of the moment. We thus cannot speak of the consequences of extraordinary elections on long-term policies.
The decline in economic activity over the previous period was a result of economic policy errors and not frequent government changes
What is certain is that the resignation of Prime Minister Vučević marks the first time in Serbia’s history that a government has collapsed due to large protests that have lasted for months and the deep sociopolitical crisis in which the country currently finds itself. All previous resignations of prime ministers came more or less as a result of politically calculated decisions and the need for ruling parties to secure a new four-year term under conditions of high certainty. The crisis that Serbia is facing is multifaceted, and the way out of it is not yet visible in the near future. I’m not sure if tensions in society will subside if the decision is taken to form a new government without elections, maintaining the current parliamentary majority. On the other hand, potential new parliamentary elections are also debatable, given the clear stance of opposition parties that they are not ready to participate unless electoral conditions are changed. Such a development could lead to a decline in economic activity and, most likely, to the undermining of key macroeconomic indicators, i.e. macroeconomic stability. We still don’t have official estimates on the movements of key economic indicators, including those related to the number of overnight stays in hotels, which is a very good indirect indicator of what we can expect in the immediate future.
