Economists explain lower deficit and public debt

BELGRADE While the two-times lower than planned deficit in January was positive, it should not be used as an indicator for the entire year, economists say. Associate of the Belgrade Economics Institute Ivan Nikolic noted that the January developments are encouraging but that they should not be seen as an announcement of budget deficit oscillations for the entire year, as the data for the first quarter should be examined first. Economists explain lower deficit and public debt Nikolic said that the effects of the Finance Ministry's actions aimed at tax amnesty became visible in January already, according to which taxpayers who pay their dues for November and December 2012 and January 2013 will have the right to tax amnesty. Nikolic stated that this had the crucial influence on the budget revenues in January, especially in terms of VAT revenues, while revenues from excise duties and non-tax revenues were relatively low. According to Nikolic, budget developments for the entire year will depend on some other factors, such as the expected increase in business activities and somewhat higher exchange in the second half of the year. Editor-in-Chief of the Quarterly Monitor Milojko Arsic stated that the budget deficit in January is seasonal in its character and is considerably lower in the first month of the year than later in the year. This is why no generalised assessment of fiscal developments in January can be made yet, Arsic said. Several months have to go by for experts to be able to say that some improvement has been made in public finance trends in Serbia, at least one or two quarters, he underscored. Budget deficit in January totalled RSD 7 billion, which is twice less than the planned figure, the Ministry of Finance and Economy stated. At the same time, the budget deficit in January was by RSD 3,4 billion lower than in the same month in 2012. The Ministry recalled that the Law on Budget set the planned budget in 2013 at RSD 121,9 billion, which makes up for 3,3 percent of the GDP, which is twice less than in 2012. Public debt reduction "only short-term" It is encouraging news that Serbia repaid EUR 125 million, and reduced the share of its public debt in the gross domestic product (GDP) to 59.9 percent at the end of January, but that positive result is only short-term, as it had not been triggered by changes in the real sector, economists told Tanjug on Monday. Professor at the Belgrade-based Faculty of Economics Ljubodrag Savic said that based on that encouraging news, one should not arrive at the conclusion that Serbia had find a way, i.e. model to reduce the public debt significantly, i.e. its share in the GDP. “For that to really happen, much more has to be done, primarily in relation to employment, production, and exports, and only if a reduction in Serbia's public debt were the result of such moves, that could be estimated as a satisfactory tendency,” Savic said. In his opinion, Serbia has managed to achieve that thanks to the facts that the cost of capital on the international market is significantly lower than one year ago, and that the country managed to replace certain rather unfavorable loan with favorable ones. Savic noted that that the issuance of eurobonds could have contributed to that positive outcome. Economist Ljubomir Madzar said he was surprised by the news that Serbia's deficit and public debt were trimmed. He presumes that certain technical incompatibility and delay in payments contributed to the positive indicators, which could be secured in the short run only. "However, in the long run, with such major budgetary obligations, about which we know that they are huge and require a large long-term deficit, that is simply not possible, and I would not be surprised, if the result were totally opposite as soon as next month," Madzar said. The Ministry of Finance and Economy announced that the country's public debt had been reduced to EUR 17.55 billion. Taking into account that the country repaid many more loans than it took out new ones, Serbia's public debt had been reduced at the end of the month to the level below the one recorded in November last year, the release reads. Tanjug

Economists explain lower deficit and public debt

Nikolić said that the effects of the Finance Ministry's actions aimed at tax amnesty became visible in January already, according to which taxpayers who pay their dues for November and December 2012 and January 2013 will have the right to tax amnesty.

Nikolić stated that this had the crucial influence on the budget revenues in January, especially in terms of VAT revenues, while revenues from excise duties and non-tax revenues were relatively low.

According to Nikolić, budget developments for the entire year will depend on some other factors, such as the expected increase in business activities and somewhat higher exchange in the second half of the year.

Editor-in-Chief of the Quarterly Monitor Milojko Arsić stated that the budget deficit in January is seasonal in its character and is considerably lower in the first month of the year than later in the year.

This is why no generalised assessment of fiscal developments in January can be made yet, Arsić said.

Several months have to go by for experts to be able to say that some improvement has been made in public finance trends in Serbia, at least one or two quarters, he underscored.

Budget deficit in January totalled RSD 7 billion, which is twice less than the planned figure, the Ministry of Finance and Economy stated.

At the same time, the budget deficit in January was by RSD 3,4 billion lower than in the same month in 2012.

The Ministry recalled that the Law on Budget set the planned budget in 2013 at RSD 121,9 billion, which makes up for 3,3 percent of the GDP, which is twice less than in 2012.

Public debt reduction "only short-term"

It is encouraging news that Serbia repaid EUR 125 million, and reduced the share of its public debt in the gross domestic product (GDP) to 59.9 percent at the end of January, but that positive result is only short-term, as it had not been triggered by changes in the real sector, economists told Tanjug on Monday.

Professor at the Belgrade-based Faculty of Economics Ljubodrag Savić said that based on that encouraging news, one should not arrive at the conclusion that Serbia had find a way, i.e. model to reduce the public debt significantly, i.e. its share in the GDP.

“For that to really happen, much more has to be done, primarily in relation to employment, production, and exports, and only if a reduction in Serbia's public debt were the result of such moves, that could be estimated as a satisfactory tendency,” Savić said.

In his opinion, Serbia has managed to achieve that thanks to the facts that the cost of capital on the international market is significantly lower than one year ago, and that the country managed to replace certain rather unfavorable loan with favorable ones.

Savić noted that that the issuance of eurobonds could have contributed to that positive outcome.

Economist Ljubomir Madžar said he was surprised by the news that Serbia's deficit and public debt were trimmed.

He presumes that certain technical incompatibility and delay in payments contributed to the positive indicators, which could be secured in the short run only.

"However, in the long run, with such major budgetary obligations, about which we know that they are huge and require a large long-term deficit, that is simply not possible, and I would not be surprised, if the result were totally opposite as soon as next month," Madžar said.

The Ministry of Finance and Economy announced that the country's public debt had been reduced to EUR 17.55 billion.

Taking into account that the country repaid many more loans than it took out new ones, Serbia's public debt had been reduced at the end of the month to the level below the one recorded in November last year, the release reads.