Keepin touch

Whether you have a question, comment, suggestion or any problem in the purview of the government, send us your message and we will try to respond as soon as possible. If your problem is not in our purview, we will forward your message to the relevant institution.

The Government of the Republic of Serbia

In the service of citizens

Government provides funds to support economy next year

Belgrade, 31 December 2008

Serbian Prime Minister Mirko Cvetkovic said in an interview with daily Politika newspaper that the 2009 budget is more restrictive and planned on the basis of last year’s revenues, expected inflation and GDP growth.

Cvetkovic said he is resolved to "tighten the belt” in the New Year and to restrain consumption, reiterating that the adopted budget is both restrictive and stimulating.

According to him, the GDP growth next year is projected to be between 3% and 3.5%.

Cvetkovic noted that the process of recovery of the world economy will also affect the Serbian economy.

He pointed out that export to the CEFTA region is also a positive, as Serbia is recording a plus in trading with CEFTA countries.

None of the ministers are satisfied with the budget, but we had no other choice, he said.

He also noted that there is a so-called "surplus of demand" and explained that as the crisis develops, demand will decrease, which is why one part of the budget had to be stimulating while the part that refers to state expenses had to be cut.

Cvetkovic also announced interventions in the infrastructure so as to stimulate employment.

Another incentive would be providing liquid funds for the economy, the Prime Minister said.

Cvetkovic noted that the state must create a channel for pouring liquidity from the financial sector to the economy, adding that €200 million will be provided for the economy from the Development Fund while another €250 million will be used as a budget guarantee for apex credits of the European Investment Bank for small and medium-sized enterprises.

We have a non-standard stimulation manner in the budget, which means the state will provide the sovereign guarantee for the National Bank of Serbia, and the bank will in turn inject funds into the economy through the financial sector, explained the Prime Minister.

He said that the point of sovereign guarantees is to reduce the price of capital, noting that there is a great probability that it will be halved and that the interest on REPO operations will drop from almost 18% to 9%.

When we add another 3% or 4% to that, which is how much business banks charge, we get the interest rate of 12% or 13%, which is acceptable for businessmen.

He reiterated that implementation of the collective agreement is practically impossible in times of crisis, because it implies a 20% salary increase which would directly lead to hyperinflation and chaos, which would in turn put additional pressure on the economy and lead to mass lay-offs.

Cvetkovic said that Jat Airways cannot receive state subsidies as is in contravention of the international convention, but the state can secure a favourable loan for its airline.

As for other subsidies, the mining and metallurgical complex RTB Bor is in a better situation because the state can offer its help, but, unfortunately, only in the way of subsidies that will merely help the company to survive, he added.

Speaking about the state guaranteeing savings deposits of up to €50,000 and abolishing the 20% tax on savings, the Prime Minister recalled that the first set of these measures has passed the procedure in Serbian parliament, whilst the second one is to be debated.

He noted that as for Fiat, Serbia is in a situation that, because of the crisis in the car industry, the key issue is whether to continue investing, that is, begin production in 2010.

I cannot speculate, but I can only say what I have heard from Fiat. If everything is all right, as I expect it to be, our timing will be excellent, if we come to a halt, then we will simply wait, he explained.

Speaking about the construction of the South Stream gas pipe line, he said that Russia has given all confirmations, adding that the energy sector will be the pillar of recovery for the Russian economy.

Russia has no better foothold for development than that and the agreement is in their best interest. I am certain that this matter will be successfully concluded, said Cvetkovic.