Despite the energy crisis, the war in Ukraine, difficulties in global supply chains, and turmoil in global capital markets, the global post-pandemic economic recovery is ongoing. This is a key factor in maintaining solid economic growth in Serbia, based primarily on external factors — relatively strong export growth (5.7% real in the first quarter of this year compared to the previous year) and relatively strong foreign direct investment (FDI – EUR 698 million net in the first four months). In addition, some domestic factors have played a significant role – such as strong fiscal stimulus (deficit of 4% of GDP) in which increased spending on public investments plays a key role (read more about the macroeconomic framework in the Assessment of the NKEU Working Group for Chapter 17). In both cases, this growth is on shaky ground. The global recovery is increasingly threatened by the efforts of key central banks to curb inflation, which reached 8.8% in the EU-27 (10.1% in Serbia) in May and is currently accelerating (hence the turmoil in capital markets). This threat alone is a major threat to Serbia, as a global recession would hit us both through reduced exports and reduced FDI, which could occur due to increased global uncertainty.
Serbian economic growth is also threatened by other factors, primarily the extremely short-term horizon with which the Government responds to the increasingly complex situation. The political effect of „closing ranks“ that accompanies every war, including the one in Ukraine, has not been used in Serbia to prepare citizens for long-term changes in the energy sector. Even if we manage to avoid shortages, an increase in energy prices is inevitable, and it should have already happened. For now, the increase in energy import costs, which amounted to EUR 130 million for electricity, over EUR 900 million for gas, and certainly a certain amount for fuel oil imports in the first four months of 2022, is being „absorbed“ by public enterprises — EPS, Srbijagas, and heating plants. In other words, it will come due in a very uncertain future. Their prices for households and small commercial consumers have not been adjusted since the beginning of the crisis, and for larger commercial consumers, only partially (read more about the „oil formula“ in interview). On the other hand, Serbia's geostrategic ambivalence towards the war in Ukraine could lead to a halt in capital inflows not only from the West but also from other parts of the world.
We do not see measures to increase energy efficiency being prepared, which could significantly contribute to reducing energy consumption, i.e., dependence on imports, by next winter, let alone the winter after that. We also do not see other measures that could help cushion the fiscal and economic shocks that are likely to continue to multiply. For example, instead of export bans and with better consideration of commodity reserve management, measures to support the procurement of expensive fertilizers to support agricultural production would benefit the Serbian economy in the context of rising prices of its products, which will certainly continue in the medium term. In this case, as in the case of discrimination against domestic SMEs, in addition to the lack of political idea/will, the problem is also the lack of institutional capacity for targeted action (see interview).
