Jun 05 Survey of economic flows in Serbia

The April business politics in Serbian economy was evaluated slightly more favorable than a month earlier.

Evident are the positive tendencies with the following indicators: foreign demand, domestic demand, liquid assets of business banks, total foreign currency reservs, average net salaries, average paid out pensions.

But, it ought to be marked that still there are not brighter signals that more lasting positive trend is established. It specially relates to dynamics of foreign demand, level of the free assets of business banks and inflation. Namely, the inflow of orders from the foreign market has expressively oscillatory dynamics while the volume of liquid assets in banking, beside certain positive movements, is still further on lower regarding 2004. The same is with growth dynamics of retail prices, for the main cause of inflation hot-sports has not yet been eliminated, so the current softening of inflatory streamings should be observed as conditionally positive.

From the negative economic movements in Serbia during April, the following ought to be selected: drop of industrial production, worsening of the structure of monetary mass M1, too high fiscal burdening, expensive credits, non-liquidity of economic subjects, insufficient dynamics of export activity as well as the still present inflatory pressures.

Reported period, as well as the past one of this year, are characterized by restrictive credit-monetary politics. Together with expressive restrictive fiscal politics, those are, for the time being, the two only measures applied and obligatorily for defense of macro-economic stability from the inflation dragon. Sadly, the restruction process of the big production systems and reformation of the state administration are rather lagging which has negative effects expressed throughout higher public spending and permanent pressure upon the rise of retail prices. So the combination of the mentioned restrictive measures is of utmost necessity in order to prevent the strengthening of macro-economic trembling but those obligatorial measures are already giving negative results due to their longer application and they are reflected as higher economic non-liquidity and thinning of physical extent of the industrial production. Such economic image of Serbia has been pointed out already in mid 2004, but it seemed that there was not enough hearing or decisiveness for braver steps for restruction process of economy and state administration. As soon as these processes are brought to an end it will surely bring relaxation of present restrictive monetary as well as fiscal politics which will result into the acceleration of economic liquidity and higher possibility for investments in rather worn out industrial capacities.