Sustainability of Serbian Public Debt in regard to Economic Crisis

Despite the considerably low share of public debt-to-GDP in Serbia relative to EU average, rapid increase in indebtedness since global crisis has emerged, as well as Greek debt crisis experience, raise the questions about Serbian public debt sustainability and possibility of “Greek scenario” occurrence. In this paper we analyze mid-term sustainability of Serbian public debt in regard to the DSA methodology of IMF for Market Access Countries taking into account main contributing variables of public debt growth. We conclude that Serbia obviously not in the position to significantly improve its public finance in the years to follow and thus do not have considerable options to avoid the new increase in debt-to-GDP ratio if the second wave of crisis emerged. However, with regards to the analysis of dynamics of variables that contribute to debt growth, it is encouraging that experience of “Greek scenario” for Serbia is not probable scenario in the medium-run, although in the long-run without cutting public finance expenditures and decreasing in the level of debt denominated in foreign currency unsustainable path of public debt dynamic could become reality.