Fiscal Council: Estimates of Government of Serbia for Economic Growth and Inflation Drop in 2024 Not Very Likely

It is not very likely that there will be a strong recovery of the economic growth in 2024, as the Government of Serbia projects, nor will the inflation rapidly slow down, estimated the Fiscal Council.

– The growth of the gross domestic products (GDP) in the first half of 2023 amounted to only 1.3% and that was substantially a consequence of one-off factors such as the recovery of the agriculture from the drought (agricultural growth of around 10%) and the growth of the production of electrical energy of around 15% (due to the comparison with the low base from 2022 and the favorable hydrological situation thanks to which the production from the hydro power plants achieved a growth of 40%), said the Fiscal Council in the Opinion on the Revised Fiscal Strategy for 2024 with projections for 2025 and 2026.

Due to that, but also the fact that 2024 will likely be another year of a slowed down global economic growth, the Fiscal Council believes that it would have been more realistic to project a slightly lower economic growth in 2024, from 2.5% to 3%.

Regarding the estimate of the Government of Serbia that the inflation will drop to 4.9% next year, the Fiscal Council says that, considering that, by the end of 2023%, the excise taxes will increase 8%, the power and gas prices will increase 8% and 10% respectively, but also that there will be an expansive fiscal policy which stimulates the growth of prices (non-selective payments for children and pensioners and other payments), it would have been more realistic to plan an average inflation of around 6%.

– The revised fiscal strategy envisages a further gradual balancing of the budget, but without major (and necessary) reforms of public finances – the Fiscal Council points out.

It is estimated that the fiscal deficit and the public debt are defined in a good direction, because a gradual reduction of the deficit is envisaged, from the planned 2.8% of the GDP in 2023, to 2.2% in 2024, and then 1.5% in 2025 and 2026, and the participation of the public debt in the GDP should also gradually lower – from 53.3% (the end of 2023) to 50% (the end of 2026).

However, as the Fiscal Council estimated, in addition to the indisputable and recognized-by-the-strategy need for a further fiscal stabilization, Serbia has numerous other aspects of public policies which are not developed well enough, such as employment and salaries in the public sector, social policy, public and state companies, selection and management of public investments, excess environmental pollution, education, healthcare.

Fiskalni savet Republike Srbije

Vlada Republike Srbije

Fiscal Council

Government of Serbia

economic growth

global economic growth

inflation

gross domestic product

GDP

Fiscal Council for 2024

Opinion on the Revised Fiscal Strategy for 2024 with projections for 2025 and 2026

increase of excise taxes

fiscal deficit

public debt

Budget Law