In times of crisis, when institutions are incapable of resolving issues through regular means because they are themselves the cause of the crisis, a crisis management system created by the government is necessary to address the situation
There is no doubt that Serbia finds itself in a deep sociopolitical crisis. This is a crisis of the country’s system, where endemic corruption reigns under the protection of institutions. Instead of being a defence mechanism to sanction corrupt activities and organised crime, the institutions are subjugated and only execute selective justice within controlled frameworks when necessary. These are mere cosmetic changes to the system, while its substance remains unchanged.
In such an institutional environment, only those close to the ruling political establishment can profit. Through expedited procedures, often without tenders and through a black-box system, deals are made that inevitably impact the development of corruption in society. Moreover, such an environment creates a negative selection of personnel, with loyal individuals preferred over professional ones.
An institutional environment designed to encourage and protect some while discouraging others limits the country’s sustainable growth and development significantly, as well as the scope for private initiative.
In an atmosphere of pronounced political instability across the country, precisely because of the absence of an independent role for institutions and the clear separation of responsibilities between the executive, legislative and judicial branches, the shortcomings of the institutional environment are fully exposed. Non-commercial risk increases dramatically, as there is no institutional framework to clearly and effectively channel all political turbulence towards solving the crisis. Instead, the crisis only spreads and accelerates, producing negative effects on the country’s economic flows.
Under conditions of political instability caused by weak and dysfunctional institutions, non-commercial risks increase and thus deepen the crisis and have a negative impact on economic flows
The confirmed resignation of Prime Minister Miloš Vučević therefore doesn’t represent a way out of the crisis for Serbia. Since institutions aren’t functioning, new elections would simply be another farce. Distrust in the government is emphasised because institutions are a reflection of the government itself. Thus, the formation of a new government from the existing parliamentary majority isn’t a viable strategy for resolving the crisis situation.
Under such circumstances, economic dynamics will yield weaker results than expected. FDI inflows will undoubtedly decrease, as capital is very cautious. This will lead to depreciation pressures on the dinar exchange rate and the need to stabilise fluctuations through foreign exchange sales. The negative effects of the crisis will also quickly reflect on tourism, especially through a reduction in foreign tourist demand. Foreign exchange inflows from tourism last year amounted to approximately €2.8 billion. There is a growing danger that the country will fall short of this year’s planned GDP growth of 4.2%.
In times of crisis, when institutions are unable to resolve issues through regular means because they are themselves the cause of the crisis, a crisis management system created by the government is necessary to address the situation, before any long-term strategies can be discussed. Current economic flows are also at risk, making it fantastical to discuss any growth and development strategies, as it is uncertain who would create such strategies and when.
