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Talking about measures that will be taken to prevent further spread of the coronavirus, Brnabic is against restrictive measures because a chance has to be given to the economy to survive.
“We had a healthy budget in March
but now we have spent a lot to support economy and citizens, for more than 400,000 tests [for coronavirus]. From where come money for respirators and PPE? That’s why we are trying to have
a balance and I do hope we can do that because of the economy and I do guarantee that we will win this wave, economically too,” Brnabic said, N1 reported on July 8.
V-shaped recovery ahead
Brnabic expressed the difficult choice facing many governments, saying that the government must fight for people's health, but also maintain balance in order to preserve the economy.
Serbia’s recovery from the coronacrisis as well as the political riots depends a lot on the European Union, as the country’s main trade partner and investor. As long as EU economies struggle to recover, Serbia will be negatively affected. On the other hand, if Germany and Italy in particular find a way to recover, it will have a positive impact on Serbia and its industrial production.
The resumption of industrial production in Serbia as demand revives in its main export markets is, however, not without problems given the risk of infection in the workplace.
Tourism, events and other services remain the most vulnerable segments. Bars alone employ over 20,000 people in Serbia where there is a long-standing and deeply entrenched coffee culture. Asked during the lockdown what would be the first thing they would do afterwards, the majority said: go and have a coffee in my cafe.
Despite all this, the National Bank of Serbia (NBS) projects that GDP will decline by just 1.5% this year, which is the lowest rate in Europe, and in 2021 there will be strong growth of around 6%. Originally the central bank forecast 4% growth but naturally the pandemic
and necessary health measures slowed down the economy in Q2, especially hitting the service sectors.
“As in most of other countries, we expect to see effects of the pandemic largely in Q2, with V shape recovery thereafter,” the NBS said in a recent report.
Government finances are set to deteriorate this year. The NBS report reads that in Q1 the government recorded a fiscal deficit of 4.1% of GDP, due to lower tax revenue and increased expenditures, particularly for medical equipment for fighting the pandemic. Increased spending continued in Q2.
In the first four months of 2020 public debt remained at a stable level of 52.4% of GDP (52.0% at end of 2019). The government programme to mitigate the negative effects of the coronavirus will lead to an increase in the budget deficit and public debt. However, public debt will remain below the Maastricht criteria level of 60%, claims the central bank.
On a more positive note, the NBS believes that investments will keep coming despite corona. According
to its Macroeconomic Development report, published on June 1, during
the first four months of 2020 FDI remained strong despite the coronavirus pandemic, with net inflows of €1.1bn, close to 2019 levels.
Investors in Serbia are pretty diversified, with the bulk of FDI inflows coming from euro area countries in 2017-19
but growing volumes from Asia, Russia, Turkey and Switzerland.
If EU economies struggle to recover, Serbia might seek more investment from China (though the benefits are questionable). There are also hopes that reviews of supply chains post-pandemic could see EU firms shifting production – especially of vital items like medicines and PPE – from China to the low cost economies of Southeast Europe.
A more realistic hope concerns the announced intention of the US administration to try and solve the Belgrade-Pristina dispute by boosting their economies.
Back to the 90s?
Comparisons have been drawn between the current protests and the decade-long resistance to Slobodan Milosevic and his regime. But the differences are numerous.
Milosevic usually stole elections against an opponent who could claim victory, and the opposition was united. By contrast, Vucic’s SNS managed to increase its share of the vote on June 21, at least partly because the divided opposition did not manage to offer a more appealing alternative. In addition, the protests in the 90s were non-violent on the side of the protesters even though the police were brutal.
The clashes and destroyed streets in Belgrade touched one of the main leaders of the student protests against Milosevic in the 90s, the leader of the Liberal Democratic Party (LDP) Cedomir Jovanovic, who was beaten by the police many times back then. Right now, he is in hospital fighting coronavirus. Reacting to happenings on the streets around his hospital, he wrote a long post on his Facebook profile in which he said that “last night hurt endlessly more than all nights we spent together suffering from the virus, from each ‘swallow’ of a razor when you are getting used to pneumonia on both sides of your lungs, of every respirator, confusion under the ‘trodon’ [strong painkiller], from all our fears for the family at home, from the despair that devoured us while we waited for our children's tests, tearing up that we might have infected them too. Today, aside from them, no one else should think that that they might be innocent. Neither government is not an innocent nor is the opposition...”
He concluded: “We are responsible for everything we have done or have missed to do, responsible because we were silent when a word was all everybody needed, we are responsible because
we were biting and growling when we had to hear and understand each other. That's why we're all guilty.”
The day after the fourth massive protests, on July 11, no one in Serbia was talking about Srebrenica on the 25th anniversary of the massacre there... isn’t that one of the things the far-righters wanted?
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