The 2012 budget revenues will be less than planned, and if no action is taken, the budget deficit in 2012 may exceed five percent of the GDP, while public debt might exceed 50 percent of the GDP, editor-in-chief of the Quarterly Monitor magazine Milojko Arsic warned Monday.

At the presentation of the new issue of the magazine, Arsic pointed out that if Serbia this year does not take measures of fiscal consolidation and continue its arrangement with the International Monetary Fund (IMF), there may be additional crisis of trust of international investment public in the country.

He stressed that fiscal policy's top priority should be the slowing down of growth of public debt in relation to the GDP, and later in its reduction.

Stopping further public debt growth requires radical moves for the reduction of the fiscal deficit in this and next year - the current government should maintain deficit within the framework agreed with the IMF, which is RSD 26 billion at the end of the first quarter, and deficit should be reduced by 1 percent of the GDP by the budget review, Arsic underlined.

In addition, the fiscal deficit needs to reduce considerably to the level of 2.5 to 3 percent in order to stop public debt growth, Arsic said, adding that the reduction of the deficit will need to continue after 2013 until the targeted level of 1 percent of the GDP is reached, and until public debt returns below the level of 45 percent.

Arsic pointed out that, even though the fiscal deficit is about 5 percent of the GDP, and the debt is rapidly growing, measures are being proposed in the election campaign which would additionally increase deficit and accelerate public debt growth.

In view of the announced abolishment of the VAT on baby food and equipment, he assessed it is not good for a country whose budget deficit is about 5 percent of the GDP to additionally reduce taxes.

According to him, the loss in state revenues to be brought by the abolishment of the VAT will be greater than the amount to be gained by the lower and middle class. On the other hand, the rich, as well as merchants and producers, will have a relatively large benefit since the margin control is not a measure sustainable in the long run.

When it comes to the increase of the minimum wage, he pointed out that it is "rather illogical" from the economic point of view, because when the demand for a good declines, i.e. in a situation when unemployment rises, it is not good to increase the price of labor.