November 10 (SeeNews) - Serbia may be unable to contain the growth of public debt caused by the increase in fiscal deficit proposed by the government in the latest revision of the 2020 budget, the country's fiscal council, an independent state body, said.
The fiscal deficit of Serbia is expected to reach 8.9% of the projected gross domestic product (GDP) in 2020, significantly above the average of 7.5% for the countries in Central and Eastern Europe (CEE), lifting Serbia's public debt-to-GDP ratio to 60% from 53%, the fiscal council said in a statement on Monday.
"To reverse the growth of public debt in 2021, it is necessary to plan a fiscal deficit of about 2% of GDP. Such a deficit would restore the disturbed fiscal stability; in the case of expected economic recovery, public debt would begin to decrease again relative to GDP," the council said.
According to the fiscal council, the biggest structural weakness in 2021 are the unreformed state-owned companies that could again demand budget expenditures, as they did in 2020. In addition, state aid to certain parts of the economy may be necessary next year.
The proposed budget revision includes non-transparent public expenditures, like 150 million euro ($178 million) increase in budget loans, supposedly for support to flag carrier Air Serbia, 100 million euro for the public investments agency, 40 million euro aid to the energy sector, as well as 35 million euro of subsidies to the air transport industry, the council noted.
Last week, the government proposed to increase the projected fiscal deficit in the 2020 budget to 483 billion dinars ($4.9 billion/4.1 billion euro) to cover the costs of strengthening the healthcare sector's capacity and limit the adverse impact of the COVID-19 pandemic on the economy. Revenues are envisaged at 1.291 trillion dinars and spending is forecast at 1.774 trillion dinars under the proposed second revision of this year's budget.
The proposed changes need parliament approval to take effect.
The fiscal cuncil is an independent state body accountable to Serbia's parliament. Its mission is to assess the credibility of the fiscal policy in terms of compliance with established fiscal rules and to provide the publicity and responsibility in fiscal policy implementation. It has three members.
($ = 0.84469 euro)