"Possible layoffs in public sector this year"

"Possible layoffs in public sector this year"

It is up to the government to decide where to save EUR 400 million, but it will probably have to cut expenditure, because there is not much room for an increase in revenue, he stated.

"We would not be surprised by a reduction of the mass of salaries in the government sector either, or by pension cuts," he said after the presentation of the latest issue of the Makroekonomske Analize i Trendovi (Macroeconomic Analyses and Trends; MAT) publication.

The depth of the problem is such that it should not be a surprise if there are austerity measures at every step in the form of a reduction of expenditures related to goods and services, subsidies and the like, he noted.

Serbia's public debt will grow until 2017 and the budget deficit has to be reduced by that time, he pointed out.

The The deficit will be around 8 percent of GDP this year, instead of the projected 7.1, he remarked.

"The public debt will probably grow from the current 65 percent of GDP to over 70 by 2017. The big issue now is whether we will be able to finance the deficit with such a large public debt during those years," he said.

When asked if the high deficit and debt would raise the interest rates on Serbia's future loans, he replied that the interest rate would depend on whether the country had a good fiscal consolidation plan.

"If the government comes out with a good program, then extremely high interest rates should not be expected even with the large public debt and deficit," he explained.

Pensions

The governments needs to save EUR 400 million, but I cannot say whether pensions will have to be reduced in the process, said MAT Editor Stojan Stamenković.

“The savings will be necessary, as well as the reduction of the deficit to the planned level of 7.1 percent of GDP,” Stamenković said, but he could not say whether and how much this will affect pensions.

“We are yet to see what will be agreed by the government and the IMF,” he said.

Commenting on the recent statement by economist Milojko Arsić that pensions will have to be cut, Stamenković said that he cannot accept this as inevitable, stressing that creating a sustainable pension system is much more important.

It is not true that the IMF is requesting from the Serbian government to reduce salaries and pensions as the media reported recently, Stamenković said.

“I was present during the talks and the IMF did not mention this. They only said that the Serbian government should make its own estimates, while they will make theirs, and that will be discussed once the government is formed and the talks are opened,” Stamenković said.

He said that the government should save EUR 400 million and reduce the deficit to the planned level of 7.1 percent of GDP.

Thereby, the budget deficit will amount around eight percent this year, he said.

During its recent stay in Belgrade, the IMF delegation tabled raising the age of retirement and length of service, and nothing more than that, he said.

“The IMF also underlined that it must not be allowed for average pensions to go below 50 percent of the average salary,” Stamenković said.

The budgetary savings could also be made by reducing the gray economy, which is believed to have reached as much as 30 percent of GDP, he said.

The question arises whether the government can reduce tax evasion, Stamenković said.