DJOGOVIC: New state-provided minimum wages possible, but under stricter conditions

Economist Sasa Djogovic expects that the state will continue paying minimum wages to help the branches of the economy that have been the most affected by the coronavirus pandemic. In order to do so, he says, the state will certainly have to incur new debts, but also set stricter requirements for getting help, as well as reduce the fiscal charges on the economy and have the structure of investments changed.

– The first requirement for new financial help to the economy is for a new government to form, which then needs to rearrange the budget, because it is obvious that the economic activities will drop to a greater extent than planned when the budget was last rearranged – the author of the publication “Macroeconomic Trends in Serbia” says for eKapija.

Djogovic proposes stricter conditions for the potential continuation of the payment of minimum wages.

– Some kind of a criterion is needed there. In other words, business entities eligible for new financial incentives must belong to the fields most affected by the crisis, such as hospitality, tourism, transport, wood processing and textile industry. Also, those companies which operated with losses even before the epidemic cannot be eligible for this kind of help, because that's like throwing money down a bottomless well – Djogovic believes.

When asked whether it's financially possible for such measures to be implemented, he says that money will need to be borrowed, but that there's also room for savings, which can be made by removing unproductive investments from the financing list.

– These are primarily investments in the security and military sector. It's hard to understand why so much is spent on military equipment, bullet-proof vests and drones, all this in the conditions when we are seeking peace and stability in the Balkans. Instead, we should spend more on medicine and healthcare, that is, on general well-being. The structure of investments is entirely wrong, not just here, but in the world as well, which is apparent now when an entire planet cannot deal with a single virus – Djogovic says.

He cites budget spending on the completion of the Church of Saint Sava as another example of a bad investment policy. He calls it “unnecessary at the moment and certainly not something that should be a priority, and it's obvious that it is treated as such, which only reinforces the notion that particular, political interests, and not the interests of the society as a whole, are followed blindly here”.

According to him, in order for there to be money to support the economy, there should be a break from “the existing economic policy of non-transparent and non-selective subsidies and investments and instead focus on subsidizing high-tech production”, whereby, he says, certain savings would be made as well.

– The non-taxable components of a salary could increase as well. That would make an additional positive financial impact on the entire economy, especially the most affected sectors – our interviewee says.

Djogovic adds that next year's budget should feature additional reduction of charges and that local self-governments should waive at least a part of the para-fiscal charges in order to make business operations easier.

When asked when the economy could expect new measures, which, according to some announcements, will not arrive before August 10, Djogovic says that the current government in fact no longer exists legally, so he doesn't expect it make any quick moves.

– However, a new government should be formed very soon, so that it can act as quickly as possible and at least rearrange the budget by the end of August, as the autumn will see a new negative impact on the economy. I'm not sure what they're waiting for. The calculations are simple. Croatia had elections two weeks after ours and they already know who makes up the new government, which is to be formed next week – Djogovic says and adds that it shows how much someone cares for the economy and how much for their personal interests.

B. Petrovic

Saša Đogović

Macroeconomic Trends in Serbia

state minimum wages

new economy stimulus measures

investment structure change

aid to most affected economy sectors

investments in the military

forming a new government

budget rearranging

2021 budget