Serbia's 2020 budget well planned, but higher wages pose risks - fiscal council

"The biggest economic mistake which concerns the planned budget policy for 2020 was already made before drafting next year's budget with the rebalance of the budget for 2019," the council said in a statement on Tuesday. "This rebalance defined an excessive increase of public sector wages of 9.6% (significantly faster than the economic growth) which has predetermined a good part of the expenditure in the budget for 2020," the council said.

The remaining budget funds have been mainly distributed in a good way, as a result of which the fiscal council is evaluating positively the proposed 2020 budget.

Earlier this month, the government in Belgrade adopted next year's budget draft envisaging a deficit of 20 billion dinars ($188 million/170 million euro), or 0.3% of the country's gross domestic product (GDP). Budget revenues are planned at 1.314 trillion dinars versus expenses of 1.335 trillion dinars.

"The revenue and expenditure projections are sound and conservative and there is no risk of the deficit getting out of control. On the contrary, the deficit could easily end up lower than planned," the fiscal council said.

The government has said it will allocate 295.4 billion dinars to salaries next year, as well as 581.2 billion dinars to pensions, adding that according to the Swiss formula, pensions will grow by 5.4% next year.

Capital investments in the draft 2020 budget are planned at 198.9 billion dinars to be used to finance improvements to Serbia's road and railway infrastructure.

The central government debt projection for 2020 is set at 50.3% of GDP.

The Fiscal Council is an independent state body, accountable to the country's parliament. Its mission is to assess the credibility of the fiscal policy in terms of compliance with established fiscal rules and to provide the publicity and responsibility in fiscal policy implementation. It has three members.

(1 euro = 117.455 dinars)