Pensions to grow by 2%

(Photo: Ivana Vuksa)

He adds that, if the pensions were to increase by a significantly larger percent, investments would remain low, which would undermine the growth of the economy, and we couldn't count on the further growth in the future.

– Keeping in mind that a real growth of GDP by 2.5 to 3% is expected this year and that the inflation will amount to around 1.5%, I estimate that pensions might grow by around 2 percent – says Dr Arsic. – The decision to increase salaries and pensions is a political one, and it will certainly be influenced by the IMF representatives as well. However, if seen from an economic point of view, the total expenditure of the state and the citizens in the next few years should grow more slowly that GDP, in order to make room for the increase of local assets for financing investments. Such decision should be made in accordance with the high growth rate of investments, employment and standards in the period of several decades, and not for the purpose of an unsustainable short-term expenditure growth.

Professor Arsic points out that investments in Serbia are very low and amount to around 18% of GDP, which cannot lead to long-term high growth rates of the economy, employment, and with that, the standard of living. To achieve the growth of GDP at a rate of four to five percent a year, which would enable the increase in employment and the standard of living and allow Serbia to gradually come closer to developed countries, investments in the amount of around 25% of GDP are needed.

– An additional problem is that even these small investments are to a large extent financed from foreign funds, which is not sustainable in the long run, because foreign loans need to be repaid, and direct foreign investments will lead to the withdrawal of dividends from Serbia in the future – the interviewee of Novosti says. – It is only when investments reach 25% of GDP that salaries and pensions will be able to grow at the same rate as GDP, without endangering their long-term growth.