Serbia needs EUR 300mn additional savings in 2014 – fiscal council

By bne IntelliNews November 27, 2013

Serbia needs to implement additional savings worth around EUR 300mn or 0.8-1.0pps of GDP in 2014 in order to curb its rising budget gap and put the public debt on a sustainable footing, the country’s fiscal council said in a report published on its website on November 26. The planned total deficit of 7.1% of GDP (including the payment of activated state guarantees, spending on saving troubled banks and companies) next year is too high and is among the highest in the CEE region, the report underscored. Serbia’s 2014 budget gap will increase by around 0.5pps of GDP compared to this year mainly due to payments of obligations related to troubled state-owned enterprises and failed banks, the report reads.

The Fiscal Councils noted that the government’s new set of austerity measures proposed in early October will not be enough to curb the rising budget gap and stabilize public debt growth by 2016. The latter will earn savings ranging from 1.0 to 1.2% of GDP instead of the expected 2% of GDP. According to the government’s fiscal strategy published earlier this year, the budget gap is seen narrowing to 5.2% of GDP in 2015 and to 3.2% of GDP in 2016 mainly due to lower debt servicing costs and employment expenditures. The Fiscal Council considers that this deficit reduction trajectory is not supported by credible measures.

The Fiscal Council urged the government to speed up key structural reforms such as the pension reform, to restructure state-owned enterprises, and impement additional savings of up to 1pps of GDP.

The Council added that nothing has been done so far to solve the problem with state-controlled banks and large loss-making enterprises such as gas supplier Srbijagas, drug maker Galenika and steel mil Zelezara Smederevo. The assessment is adding additional pressure to the government to implement the announced restructuring plan of state-owned enterprises by end-2014. The latter are expected to cost some EUR 600mn to the budget next year, equaling to 1.7% of the GDP, the report read.

The Council also said Serbia will have to borrow an average EUR 5bn per year to finance its budget gap and service its debt in the next 5 years, adding that the country must reach an agreement with the IMF in order to guarantee foreign investors’confidence in its economy while dealing with outstanding fiscal issues.

The Fiscal Council is elected by the parliament and is legally obliged to provide an independent assessment of the government's economic policy.

 

Related Articles

Dacic to head Serbian technical government until Vucic picks his replacement

Serbia’s Minister of Foreign Affairs and First Deputy Prime Minister will lead the country’s technical government for an unspecified period, namely until outgoing Prime Minister and ... more

RBI doubles net profit y/y in Q1 as Russian business recovers

Raiffeisen Bank International (RBI), the second largest bank operating across Central and Eastern Europe by assets, reported that net profit almost doubled year-on-year to €220mn in the first ... more

China's Hesteel Group to boost investments in Serbia’s Smederevo steel mill

Representatives of China's Hesteel Group, which acquired Serbia’s only steel mill Zelezara Smederevo in July 2016, plan to invest ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Dismiss