Experts analyze new budget

Economists believe that the budget for 2009 will be difficult to implement, while the financing of the planned deficit remains an open issue.

Izvor: B92

Sunday, 07.12.2008.

16:04

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Economists believe that the budget for 2009 will be difficult to implement, while the financing of the planned deficit remains an open issue. According to a proposal adopted by the government on Saturday, Serbia's budget next year will have income of RSD 698.7bn, RSD 748.3bn of expenditure, with a projected deficit reaching RSD 49.6bn. Experts analyze new budget But economist Milan Kovacevic says that the budget's revision is certain down the line, and that the present calculations have "optimistically projected the GDP to grow". However, should that growth stall, the deficit will increase, he explained. "As for expenditure envisaged here, it will add significantly to the inflation. This year, with a world crisis of this kind, we are concerned how to achieve these two things that are in collision – to lower the inflation which is much higher than elsewhere in the region, and to keep the economy growing," said Kovacevic. Meantime, Belgrade's Ekonomist magazine editor Milan Culibrk believes that the key issue with the proposed budget is the financing of the deficit, in the context of an expected drop of foreign capital arriving in the market in 2009. Culibrk reminds that the FDI in the first nine months of this year amounted to USD 2bn, while in 2009 "these sources will run dry, or will be significantly smaller". He believes that in order to finance a deficit of nearly RSD 50bn, the state will have to borrow money. "If the state borrows from the domestic market – since the foreign market is to all intents and purposes closed for it – that will mean less money for enterprises, lower economic growth, and perhaps more pressure on the prices," Culibrk continued. Compared to this year, the customs income alone is projected to drop RSD 20bn in 2009. This decrease will come as a consequence of an expected fall in imports, once again, due to the economic crisis, but also because Belgrade intends to start unilaterally implementing an interim trade agreement with the EU, which will see customs duty lowered for the goods and services imported from this organization's markets.

Experts analyze new budget

But economist Milan Kovačević says that the budget's revision is certain down the line, and that the present calculations have "optimistically projected the GDP to grow". However, should that growth stall, the deficit will increase, he explained.

"As for expenditure envisaged here, it will add significantly to the inflation. This year, with a world crisis of this kind, we are concerned how to achieve these two things that are in collision – to lower the inflation which is much higher than elsewhere in the region, and to keep the economy growing," said Kovačević.

Meantime, Belgrade's Ekonomist magazine editor Milan Ćulibrk believes that the key issue with the proposed budget is the financing of the deficit, in the context of an expected drop of foreign capital arriving in the market in 2009.

Ćulibrk reminds that the FDI in the first nine months of this year amounted to USD 2bn, while in 2009 "these sources will run dry, or will be significantly smaller".

He believes that in order to finance a deficit of nearly RSD 50bn, the state will have to borrow money.

"If the state borrows from the domestic market – since the foreign market is to all intents and purposes closed for it – that will mean less money for enterprises, lower economic growth, and perhaps more pressure on the prices," Ćulibrk continued.

Compared to this year, the customs income alone is projected to drop RSD 20bn in 2009.

This decrease will come as a consequence of an expected fall in imports, once again, due to the economic crisis, but also because Belgrade intends to start unilaterally implementing an interim trade agreement with the EU, which will see customs duty lowered for the goods and services imported from this organization's markets.

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