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Ekonomika preduzeća
2018, vol. 66, iss. 1-2, pp. 19-41
article language: English
document type: Original Scientific Paper
published on: 03/05/2018
doi: 10.5937/EKOPRE1802019D
Digital Serbia: Economic context adjustments for double GDP
University of Belgrade, Faculty of Economy, Department of Business Economics and Management

Abstract

Serbia's economy is full of binding constraints feeding the crisis of transitionism. Breaking away from transitionism requires a complex reform agenda, including three sets of activities. First, annulation of past failures through crisis management (or fiscal consolidation) as well as structural reforms. Second, adoption of the new growth model and economic policy framework consistent with paradigm change in economic theory and policy, as well as with new normalities. Third, investment in new fields in accordance with mega trends. This paper updates the status of debate about what to do in Serbia after success in program of fiscal consolidation 2015-17. There are two priorities. First, for catching up to the EU, Serbia must double the output in the foreseeable future. Second, to achieve meta-national advantage, Serbia's economy must undertake digital transformation. Our intention is to offer a conceptual paper, by debating broad-based institutional design questions with some nitty-gritty technical points and provide recommendations based on past experience in Serbia and successful examples of other countries. After fiscal consolidation, we propose concentrating on two remaining issues. Along with locking-in fiscal balance, our priorities are: the manufacturing-led growth model based on digital transformation and heterodox policy platform with industrial policy for ICT in the center. In the suggested growth model (and policy platform), the main sources of growth are advanced manufacturing and high value-added services. In terms of digital transformation, Serbia is lagging behind its counterparts from the EU. In closing the gap, the role of industrial policy is imminent. Our objective is to analyze the general principles to guide industrial policy for ICT sector in the long-run, as well as to discuss specific measures to be taken today. In our previous papers we have already advocated for heterodox approach giving the framework with concrete hard macroeconomic policy regime as well as the architecture of industrial policies, both horizontal and vertical. This paper explores how policy makers can facilitate transition toward digital economy and what choices they can make to prepare for the impending wave of change. In a digital transformation, Serbia must concentrate on structural reforms based on broader adoption of ICT products and solutions in advanced manufacturing that will reconfigure value chains of industry leaders and boost productivity in tradable sectors from the real economy (manufacturing, agriculture, physical infrastructure, transport and logistics, waste management, etc.). Also, it must concentrate of high value added services (science, education, health care, programming, etc.) due to their catalyst role in dynamic economic growth. Previous logic is a base for structuring the following sections. The paper is organized in seven sections, apart from Introduction and Conclusion. We start with two main realities, the fourth industrial revolution and demising orthodox approach in economics and economic policy formulation, continue with new global normalities and heterodox approach as an antidote to crawling jobless growth around the world, and finish with fiscal balance and the role of industrial policies in the new growth model as well as with the role of digitalization in tradable sectors. Special attention is dedicated to industrial policy in ICT and its role in Serbia's economic recovery.

Keywords

industry 4.0; digital transformation; ICT; fiscal consolidation; heterodox approach; hard macro-economic policy regime; automatic stabilizers; industrial policy

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