Stimulating consumption "no solution for Serbia"

National Bank of Serbia Governor Dejan Soskic has said that stimulating domestic consumption in order to overcome the crisis was "not applicable in Serbia". It would directly cause an increase in the country's trade deficit, the central bank chief warned. Stimulating consumption "no solution for Serbia" Stimulation of domestic consumption could have an effect in large economies, which direct most of that spending on domestic products, Soskic told Tanjug. Serbia's options are limited, and if it decides to spend more, it goes against the fiscal rules, he noted. It would mean a higher public debt, which would at the same time be against the budget system law and cause an increase in the cost of financing the country's public debt, Soskic explained. Higher consumption in Serbia has a direct influence on the growth of the deficit in the balance of payments, and that deficit is one of the chief causes of the macroeconomic imbalance, the governor remarked. Since those options, suggested by experts around the world, are not realistic for Serbia, Soskic stressed there was only one way then, to reduce current spending and use every dinar in the budget rationally. Serbia should also try to increase the share of the funds going to infrastructure, meaning public investments, in its public expenditure, as it would stimulate economic activity and employment, but without raising the budget deficit, he said. The growth of the public debt has its limits, and unless Serbia does not take care of it, the market reacts by pressuring the national currency and raising the costs of debt payment, Soskic stated. If Serbia does not conduct a reform on its own, it is very likely the international and domestic market situation, to which it is very sensitive as a country, will force it to do so, Soskic underscored. Dejan Soskic (Tanjug, file) Tanjug

Stimulating consumption "no solution for Serbia"

Stimulation of domestic consumption could have an effect in large economies, which direct most of that spending on domestic products, Šoškić told Tanjug.

Serbia's options are limited, and if it decides to spend more, it goes against the fiscal rules, he noted.

It would mean a higher public debt, which would at the same time be against the budget system law and cause an increase in the cost of financing the country's public debt, Šoškić explained.

Higher consumption in Serbia has a direct influence on the growth of the deficit in the balance of payments, and that deficit is one of the chief causes of the macroeconomic imbalance, the governor remarked.

Since those options, suggested by experts around the world, are not realistic for Serbia, Šoškić stressed there was only one way then, to reduce current spending and use every dinar in the budget rationally.

Serbia should also try to increase the share of the funds going to infrastructure, meaning public investments, in its public expenditure, as it would stimulate economic activity and employment, but without raising the budget deficit, he said.

The growth of the public debt has its limits, and unless Serbia does not take care of it, the market reacts by pressuring the national currency and raising the costs of debt payment, Šoškić stated.

If Serbia does not conduct a reform on its own, it is very likely the international and domestic market situation, to which it is very sensitive as a country, will force it to do so, Šoškić underscored.