According to an economic analyst, Mr Vasilije Kostić, the possible reduction in tax rates would be a wrong step in an endeavor to save a part of the budget revenues, writes Dnevne Novine daily.
Asked to say what if the future government doesn’t ensure the missing part of the money for the functioning of the state, Mr Kostić says that restrictions and the reduction in general and personal spending are new normal.
“Such circumstances are not desirable for any government, because reducing general and personal spending is a secure way to quickly lose popularity,” said Kostic, who is also a professor at the Faculty of Management in Herceg Novi.
He also points out that the assistance of the current government through three packages of support to businessmen in order to suppress the consequences of the coronavirus, has been successful.
Speaking about the economic priorities of the future government, that is, sectors in which it should be investing the most (tourism, energy, agriculture) in order to recover from the coronavirus crisis, Mr Kostić said: “The permanent shortcoming of the Montenegrin economy resulting from an inadequate strategic actions refers to the absence of the needed level of diversification of its structure in line with the current changes at the European and regional markets. It could be a major strategic point on which the future progress of the Montenegrin economy should happen. As for the recovery, it’d be a short-term need and it’s not supposed to be our goal.”
On ways in which the future government can react and ensure the missing funds for the functioning of the state, having in mind that the tourism revenues dropped by 85%, he stated: “If your costs are the same and revenues decreased, the only way to ensure the unchanged level of spending is sale or borrowing. One can think that things referring to budget revenues might be better by decreasing the tax rates, but it’d be a wrong option, as fiscal expansion during a general decline in demand is not effective. On the contrary, it’d only make things worse.”
Preps for the next season
As representatives of the Ministry of Tourism announced preparations for the next tourism season, Mr Kostić noted: “It’s absolutely good idea to already start with the preparations for the next season under condition that it doesn’t only mean making projections but rather exposure assessments and chances for failing to achieve the desired results.”
