Transition is once again in the spotlight. We know that transitional chaos is a topic that many readers have heard enough about. However, after fiscal consolidation in 2016, Serbia finally has the chance to escape more than a quarter-of-century long freefall due to transitionism (never-ending transition). As a result, in this edition of Ekonomika preduzeća we invited our most prolific and acclaimed authors to produce groundbreaking analyses on how to fix the economy in Serbia.
Breaking away from transitionism requires a complex reform agenda with three sets of activities: annulation of past failures, adaptation of the new policy framework and investment in structural changes. We intend to provide evidence-based answers by discussing all the relevant details from both macro and micro perspective, and their interconnections in particular. It is an attempt to create a framework from the ground up, primarily from the microeconomic viewpoint. To understand what causes growth, one must look inside industry structure and behavior of the main competitors, as well as to establish the framework from the ground up to adjust their risk appetites to the macroeconomic fundamentals.
In the Introductory Paper, after observing lessons learnt from previous mistakes and the emerging new normality, as well as megatrends in the global economy, D. Đuričin searches for the best ideas on how to restart Serbia’s growth engine by employing the heterodox policy framework as a valuable alternative to the neo-liberal (or orthodox) policy framework. After fiscal consolidation, the author particularly emphasizes the complementarity of the industrial policy for tradable sectors and the pro-growth monetary and income-neutral fiscal policy. In the Macroeconomics section, D. Vuj ov i ć, P. P e t r o v i ćet al., M. Labus, J. Tabaković, D. Šoškić, S. Ranđelović and V. Vučković et al. work jointly on the structural fault lines in the economy, as well as in the institutional setting for the sake of defining a sound and pro-growth economic policy platform necessary for escaping the transitional trap. Positive aspects of fiscal consolidation and monetary stability are presented, but some of the remaining pitfalls are brought to light in more detail.
Perhaps the most important insight into the problem, one which is based both on theory and real-life examples of fiscal consolidation, is offered by the Minister of Finance, D. Vujović. He provides a thorough analysis of the fiscal consolidation since 2015, reveals the main achievements and points to the accomplishments which yet remain to be attained. To provide a complete picture of the abovementioned reforms, P. Petrović, Chairman of the Fiscal Council, with two co-authors, D. Brčarević and S. Minić, as the voice of caution, indicates the gaps that Serbia still needs to fill in, despite the encouraging progress in economic and fiscal trends, in order to attain healthy public finances. The authors underline that the observed improvements rest primarily on short-term and unplanned factors that are easily exhausted. The reality will prove them right or invalidate their statements.However, the results of the consolidation reform could be interpreted correctly only if they are measured in a correct manner. If we do not measure something, we cannot manage or improve it, the axiom holds. But if we measure things incorrectly, the results might be the same. The problem, as M. Labus demonstrates, is that we simply do not measure GDP in the proper manner. The author shows how nowcasting can provide timely GDP estimates one or two months after the end of the quarter. This is in stark contrast to the current methodology, providing reliable and revised estimates only at the end of the following year.
What does the Governor of the National Bank of Serbia, J. Ta b a k o v i ć , has to say about the monetary system? Quite a lot, as it turns out. The author elaborates the policy-measure set that reached the main monetary targets: inflation control, FX stability and stability of the financial system. Is there room for improvement in the domain of monetary policy and functioning of the financial system? In his paper, the former Governor of Serbia’s central bank, D. Šoškić, intends to check the abovementioned paper’s factsheets. The author analyzes specific problems of monetary economics and the financial system’s status quo and offers recommendations. The following two papers examine the growth issue observed through the fiscal lens. S.Ranđelović examines the factors of well-established shadow economy in Serbia compared to other CEE countries and identifies key elements of the effective strategy aimed at boosting tax compliance and tax morale. Additional analysis of the fiscal policy and shadow economy comes from a trio – V. Vučković, S. Vučković, and M. Stefanović. The authors map out general directions of desirable tax administration reform and explore new regulatory solutions.
In the Microeconomics section, A. Trbovich et al., E. Jakopin, I. Vuksanović, Z. Mihajlović, S. Kisić-Zajčenko, D. Lončar et al. and G. Petković et al. deal with different framework and sector-based analyses coupled with proposed policy measures. This section addresses competitiveness improvement from the industrial policy perspective, and its different horizontal layers, such as innovation, science and technology policy, building up entrepreneurial skills, as well as the vertical policies targeting manufacturing, transport, health care, trade, and tourism.Specifically, a trio of authors – A . Trb ov i ch, N. Savićand Z. Kukić deals with digital transformation and technological development in Serbia with the emphasis on the ICT and software engineering education. Technical competence, educational background and working conditions of software developers in Serbia are in focus of the paper. E. Jakopin, guides us through RIS3 smart specialization process as a way for the government to foster innovation in the manufacturing sector. The role of the government in promoting economic activity and innovation in particular sectors of the economy, or in the economy as a whole, remains unclear as the debate on the topic is still ongoing. I. Vuksanović proposes a new approach to the industrial policy that reconciles opposing attitudes and clears away most of the stumbling blocks. A matrix approach where horizontal, framework-based policies are intersected with vertical, sector-based policies is applied to the Serbian case. In the block of more specialized papers, Deputy Prime Minister, Z. Mihajlović explores critical points of defining and realizing Serbian transport policy. In her p ap e r, S. Kisić-Zajčenko analyzes preconditions for youth entrepreneurship, both on institutional and financial level, and provides guidelines for a horizontal policy aimed at enlarging entrepreneurial skills and the education base. D. Lončarand F. S t o j a n o v i ć provide a gap analysis of the health system in Serbia compared with the best practices in Europe, and offer a number of recommendations for improving the efficiency of spending public money. The last paper is dedicated to social trade and tourism. Trio of authors – G. Petković, B. Knežević and R. Pindžo introduces cases of socially responsible entrepreneurship in Serbia and Croatia. Responsibility toward society and toward nature are the final pillars supporting a circular economy that might be, from today’s viewpoint, the very distant vision we are striving toward.
Accurate analysis unlocks an entire cascade of opportunities that will accelerate the pace of growth, a central issue of the future economic policy in Serbia.