Coronavirus crisis is something we haven’t seen in human history. It affects the most valuable factor of production – a man, putting his health in danger. That danger has automatically reduced or even stopped the production. However, recovery doesn’t happen without people. Therefore, fight against coronavirus is a fight for economy. But human lives in priority. Economy comes next, says in the interview for Dnevne novine Mr Božo Mihailović, professor at the Faculty of Economics and president of the Association of Economists.
As a very experienced economist, what’s your opinion about the set of measures imposed by the Government? What effects can such measures produce?
Mr Mihailović: Montenegro’s Government reacted in due time. Measures are complete and consistent, aimed at maintaining the functioning of our system .
By that I mean delay in the repayment of liabilities for 90 days, just enough to take some breath and, with God’s help, be ready once this is all over.
Now more than ever, we need general approach to the state and society. We must forget individual problems or interests. From the economic aspect, no Government has a magic wand. Our Government did its best to protect economy and citizens in the present circumstances.
What do you mean by “the Government doesn’t have magic wand”?
Mr Miahliović: I mean that the Government can share what it disposes of. And what it disposes of comes from the sources defined by law and referring to the budget filling. We should all know that, regardless of the size of a pile, it depletes when you take from it.
This is the first set of measures and it’s a good one. It is essential in this situation that every citizen understands that this is pour common problem, and that distribution of burden should contribute to coming to grips with it.
Governor of the Central Bank said that deposits were safe, that banks were highly liquid and that they would help companies get out of the crisis. What can financial institutions do in this situation?
Mr Mihailović: Governor’s statement is very important in this situation from the aspect o0f the stability of the financial and overall system .Financial institutions must know that they depend on their clients, that clients are their market and that the market is facing a serious problem right now. They should, therefore, focus on clients and see what they can do.
Delay of the repayment of liabilities is the only way for the clients and people in business to take some breath and see what they can do in this complex situation. Now banks have an additional responsibility, not just professional but also moral. Only banks dispose of universal goods called money.
To what extent can movements of new lines of Investment and Development Fund can have an impact on the mitigation of consequences of the coronavirus in Montenegro?
Mr Mihailović: I welcome everything IDF does. It’s good to see that there’s at least one important and healthy financial institution, which will help the economy. Conditions are excellent: two years of grace period, interest rate over 1%, eight years of repayment period… IDF funds will be a positive injection for the most affected sectors.
We must not forget production and huge systems we depend on. They must be preserved and that will be very difficult. Not just because of money but also due to the difficulties in the provision and sale market.
The Government has earmarked €1 million for the most vulnerable groups. We know that there are contributions to overcoming this crisis…
Mr Mihailović: Helping the most vulnerable groups is an excellent move, because we all start from the ones with the lowest earnings. Even €50 means a lot to them. I am glad to see that many athletes, businessmen and citizens individually have realized the situation we are in and that Montenegrin solidarity has been demonstrated. I’ve just remembered a saying: “Help me when I am in difficulty, I can sing alone”.
Currently we have over 5.000 people in different forms of isolation. They must eat and be provided with personal hygiene. This is a very complex situation and, as a citizen, I am proud to see that many people can make contribution.
You have said recently for Analitika portal that now more than ever we need understanding, togetherness, tolerance…
Mr Mihailović: And I can say that again. Sharing that little cake in a fair way. Because that cake is melting, our reserves are melting and we must organize well. Every euro becomes a rare factor. That one euro today has greater value than it had a month ago.
What do you think will be the consequences of the coronavirus in Montenegrin economy? Could tourism “work” in case pandemic is over for example by the beginning of June?
Mr Mihaliović: It is very difficult to make forecasts, due to the period the pandemic will last. All forecasts can only be made approximately and must be based on specific assumptions. I am an optimist by nature, but we must be moderately optimistic now.
It will depend on the period, international factor, deadlines… All this should be taken into consideration and then make assessments. I am not like that.
What do you mean?
Mr Mihailović: Our GDP amounts to €4,5 billion. When we divide it to 365 days we reach an amount of around €12 million or €12, 5 million on a daily basis. For 30 days, that amounts to €360-€380 million monthly. These parameter are fixed and we need the parameter indicating the reduction of the value on a daily basis, and monthly in GDP structure. Only then can we tell if there will be recession.
Could reduction in the package arrangements and prices in the Montenegrin seaside have an impact on tourists’ decision to visit Montenegro, provided that WHO declares the end of the pandemic before summer season?
Mr Mihailović: As far as tourism is concerned, I hold that prices should remain the same. No matter the reduction in prices, nobody will come now. Bringing the prices back to the old level is a problem. We must be careful, see what’s going on with the virus, in the surroundings, and then act accordingly. Only when conditions for tourists to travel are created, can we start thinking about corrections of prices. Sectors that were on the impact first will start functioning first because they are very adaptable, inclusive of tourism.
Dismissal danger in the private sector is very real. What can be done in that context? What will citizens come back to when the pandemic is over?
Mr Mihailović: I will everybody in private sector will abide my legislative norms. It’s not good and it’s not human to dismiss anybody in a situation like this. I understand the position of employers, but instead of dismissals, they can choose to reduce salaries. The Government has enabled employers and employees to be satisfied with the reduction in salaries and delay in the repayment of liabilities. Every employee should contribute to the maintenance of the system they operate in, because the country cannot do that.
For how long can the state keep paying pensions and salaries regularly?
Mr Mihailović: For as long as the amount of money allows. All taxes and contributions that have been delayed mean lesser budget filling. The fundamental question is: How to fill the budget and how to spend it? I believe new indebtedness is a reality, and so is EU donation. But still we should rely on ourselves.
And that means what?
Mr Mihailović: What we can do is save money at all levels and reduce salaries in state administration. For example, salaries of MPs have reached €2.000. Salaries must be reduced and everybody should save money. I believe the EU will provide donations. I am just talking about principles. I also believe promises PM has made will be held – pensions and salaries will be regular.
What is your message to Montenegrin citizens?
Mr Mihailović:Respect the institutions, measures, do all you can to get out of this as soon as possible. And bear in mind, human lives matter the most. Lives first, and then economy.
Continuation of works on infrastructure projects – good decision
How will this pandemic impact the completion of the highway?
Mr Mihailović: PM’s statement that works will continue is very encouraging, although it will be difficult. But our state policy is clear. We do the best we can do.
Plant the seed
My recommendation to citizens is to plant something, if conditions allow. It’s sowing time and I think we should use the conveniences Ministry of Agriculture offers.
