Europe's forthcoming stagflation has called for prudent and frugal budgetary planning in the region.
By Biljana Lajmanovska for Southeast European Times in Skopje -- 14/11/12
Governments are tightening budgets in 2013. [Aleksandar Pavlevski/SETimes]
The continuous economic crisis has influenced the regional countries' 2013 budgetary expectations, promoting most to plan for tighter budgets in the year ahead. Macedonia, whose draft budget has entered parliamentary procedure, plans to spend 2.7 billion euros in 2013, roughly the same as this year, but has made slightly more modest growth projections.
"Next year's budget is a true response to the European economy's crisis which has impacted Macedonia as well," Prime Minister Nikola Gruevski said.
Macedonia's opposition is eager to point out that the government reforecasted growth projections from 4.5 percent to 2 percent this year, but many economists are confident the growth, however tamed, will continue in 2013.
"Given expectations for further stagflation in Europe -- concurent stagnation and inflation -- Macedonian economists and policymakers projected only modest growth. There are many risks connected with the speed with which the European economy will recover, so there were no arguments to go with a different projection. But the economy will nevertheless grow," Ognen Orovcanec, economist and president of Macedonia's Agro-Business Chamber, told SETimes.
The Macedonian government plans bigger capital and agriculture investments to boost the economy, but also a deficit increase of 3.5 percent of GDP.
On a positive note, many foreign companies that invested in Macedonia will begin production in 2013, which will influence GDP growth, Viktor Mizo, director of the Directory of Technological-Industrial Zones, told SETimes.
The Bosnia and Herzegovina (BiH) 2013 state budget also has yet to be adopted, but officials said they expect it to be similar to last year's 420 million euros in spending.
"[It will remain] restrictive and will not allow additional employment in the state administration next year," Nikola Spiric, minister of finance of BiH, said.
Analysts said they are not surprised. BiH ended last year with an additional IMF loan of 387 million euros to fill existing budgetary gaps and repay old debts.
"The story about [generating] savings has lasted five years, but the government is saving only on the citizens. As in previous years, the citizens will pay the highest price for exacting savings as there is no investment in the economy," Svetlana Cenic, former finance minister of Republika Srpska, told SETimes.
BiH's foreign debt is about 3.5 billion euros and growing.
"A catastrophic economic policy," Cenic said.
By contrast, Serbia's 2013 budget revenue is projected to increase by 15.3 percent and expenditures by 3.4 percent, while the deficit to fall by to two-fifths. Serbs thus expect an increase in the share of public revenues in GDP.
But economist Miroslav Zdravkovic said he considers the projections too optimistic.
"The budget deficit has been one of the biggest problems inherited by the new government, which 'peaked' at about 7 percent of GDP, even though the plan was not to exceed 4.25 percent this year," Zdravkovic told SETimes.
Zdravkovic said the 2013 budget is very tight, and predicted a deficit of 3.5 percent of GDP.
"It is evident Serbian citizens will suffer the most from these measures. Past experience shows it is impossible to maintain the deficit at a normal level," he said. The Serbian government had to revise the 2012 budget and increase the value added tax from 18 to 20 percent in order to make up for the economy's poor performance.
Hit severely by the crisis, Romanian businessmen have demanded the 2013 budget to be drafted cautiously and money be spent wisely to allow the economy to better face the numerous challenges.
"We request a growth pact be accepted by all parties as a guarantee of keeping an attractive business environment and limiting populist measures," Cristian Parvan, secretary of the Businessmen's Association of Romania told SETimes.
SETimes correspondents Katica Djurovic in Belgrade, Drazen Remikovic in Sarajevo and Gabriel Petrescu in Bucharest contributed to this report.