5th June 2022, Skopje – Measures should exist – targeted and tailored, so as for the vulnerable categories to be able to overcome the crisis. They should be timely as well in order not to permanently disrupt the market principles. Everything else is fanning the flames, since injecting additional liquidity amid insufficient supply, which, on the other hand, is conditioned by import inputs, will only put additional pressure on price increase. The model of targeted measures, which we will apply later, is recommended by both the European Commission and the international financial institutions, such as the World Bank and the IMF, Minister of Finance, Fatmir Besimi, wrote in his new column dedicated to SEFF 2022 and sustaining growth in times of uncertainty.
“Professor Krugman has nicely elaborated on this issue in his address. The situation now differs from the one in 1979 (for information purposes – at the beginning of the 80s, expectations for high inflation were much more longer-term, as a result of which the workers demanded higher wages, while the employers, due to the expected inflation, were ready to pay them, resulting in inflationary spiral, which eased years later with a strong contraction of the economy). Inflation expectations now are shorter-term – stabilization is expected next year already. Professor Krugman pointed out that we will again have 2019 in 2024, and the deflationary tendencies will than become prevalent again. The only question is how to get there. One option is slight slowdown of the economy, with the other being a sharp decline. All this depends on how we will manage inflation thereon. Are we going to enter an inflationary vortex or avoid it wisely. Our challenge in times of uncertainty is to sustain growth”, Minister Besimi wrote.
Minister Besimi goes on explaining that the first set of measures was aimed at cushioning the initial severe blows of the crisis, such as hindering the price shock and the speculative price increase, thus halting the inflationary pressures so as to prevent higher inflation rates.
“Tax relief was accompanied by the measures aimed at freezing the prices and setting the margin cap on the commodities. So-far implemented measures, geared towards combatting the price and energy crises, amount to around EUR 615 million, being one of the highest fiscal stimuli allocated in the region. To the end of focusing the measures on the vulnerable categories, as well as the gradual fiscal consolidation, the new anti-crisis measures will be targeted. Taking care of the citizens and the economy will continue, while remaining committed to conducting a prudent fiscal policy, thus reducing the budget deficit in the medium term. Under the Supplementary Budget, around EUR 76 million has been projected for anti–crisis measures, as well as subsidies for minimum wage increase, significant additional funds for agricultural subsidies – to end of increasing the yields, as well as funds for increasing both the pensions and the transfers for guaranteed minimum income, increasing the wages in most of the public sector, education, health, judiciary, prosecution, police and army”, Besimi pointed out.
Minister also writes about a significant period ahead of us during which creating the public opinion will be equally important, if not much more important that the specific economic measures that will be undertaken. This is so because inflation depends on three factors – supply, demand and inflation expectations, with the third factor having a strong impact on the first two.
Besimi underlines that fiscal policy should and will be aimed at sustaining the growth and the fiscal consolidation, as well as implementing structural reforms, since only a stable economy can produce sustainable growth and because structural changes are necessary to boost higher growth rates.
At the end of the column, the Minister points out that SEFF platform continues adding fresh contents, discussions and answers to new questions, and the focus will be aimed at the youth, the youth initiatives, networking, building partnerships, since the future lies with the youth.