Fiscal Council: New Economy Stimulus Package Would Need to be Far Smaller that the First one, Salary Freezing in 2021 Justified

The Fiscal Council believes that, in the upcoming period, the state should focus on reducing the deficit in 2021 to around 2% of the GDP, to the end of recovering fiscal stability, disrupted, as they say, by the COVID-19 health crisis.

Furthermore, the Fiscal Council recommends an increase in state spending on infrastructure, as well as a control of the growth of pensions and salaries in the public sector in 2021. The Fiscal Council believes that a full freezing of the salaries would be justified as well.

A potential new economy stimulus package would need to be far smaller than the first one, selective and temporary, the Fiscal Council says.

In addition to that, the crisis has provided an additional reason for investments in healthcare to increase, according to the latest report on the impact of the health crisis on the economic and fiscal trends in the country.

According to the council's estimate, Serbia's GDP will drop by 3% in the current year, the budget deficit will be 7% of the GDP, and the public debt at the end of the year would be at slightly over 60% of the GDP, all due to the negative effects of the coronavirus crisis.

The Fiscal Council still notes that there's a great degree of uncertainty about all the projections in the report, for objective reasons, which is why they shouldn't be interpreted as unconditional and fully precise, but as the most likely scenario at the moment.

If, however, strict measures pertaining to the limited movement of citizens and a ban on operations in certain branches of the economy are reinstated in the second half of the year, the economic activity will further drop compared to the previous projections – in that case, the GDP drop in 2020 might be higher than 3%, potentially reaching 5%, the Fiscal Council warns.

Fiskalni savet Republike Srbije

Fiscal Council

GDP

public debt

economy aid

economy stimulus package

coronavirus

salary freezing

public sector

investments in healthcare