International Information Centre for Balkan Studies

Serbia's economic growth disappointed, EBRD says

November 7, 2019

The European Bank for Reconstruction and Development (EBRD) said in its latest report that economic growth in the Western Balkans is slowing due to weaker global economic prospects, adding that growth “disappointed in Serbia.

“The EBRD sees economic growth moderating in the Western Balkans region in 2020, on the back of a weaker global economic outlook, along with the economic slowdown of the eurozone,” a press release said.  

The EBRD Regional Economic Prospects report said that growth in the Western Balkans was already weak in the first half of 2019 (down by 1 percentage point from 2018), with the exceptions of Kosovo and North Macedonia.  

“Growth disappointed in Serbia, with weak industrial production; exports from Fiat’s Serbian car plant have been falling. While the region has benefited from foreign direct investments (FDI), the local supplier base remains small, limiting the positive spillovers from FDI to the local economy,” the report said.  

“Economic growth subsided in Serbia during 2019. Unfavourable trends in industrial production continued in the first half of 2019, with industrial output declining by 2.0 per cent year on year on the back of falling production in mining and manufacturing, while utilities and agricultural output stagnated. As a consequence, the overall GDP growth rate slowed to 2.8 per cent year on year in the first half of 2019, from 4.4 per cent in 2018. The 2019 budget envisages a small deficit (0.5 per cent of GDP), while public debt stood at 54 per cent of GDP at the end of June 2019.” it said.  

According to the EBRD inflationary pressure was low thanks in part to a strong exchange rate. “Inflation initially picked up in 2019, reaching 3.0 per cent year- on year in April, but then fell back to 1.1 per cent in September, undershooting the lower bound of the central bank’s target band (3 ± 1.5 per cent). After keeping the policy rate unchanged at 3.0 per cent for more than a year, the central bank cut the rate again in the third quarter of 2019, to 2.5 per cent.” the report said.  

The report authors expect Serbia’s GDP to expand by 3.2 per cent in 2019 and 3.5 per cent in 2020. “Domestic demand should remain the main growth driver, while net exports are most likely to continue their negative contribution. The economic slowdown of the main trading partner, the European Union, and the slow pace of reforms within the country might act as a drag on growth in the near term and make it more volatile,” the EBRD said.  

The report said that there are no reliable assessments of the effects of the 100 percent tariffs on Serbian goods that the Kosovo authorities imposed but added that the negative effect on the Serbian economy could stand as high as 400 million Euro.

Source:  http://rs.n1info.com/English/NEWS/a541579/EBRD-expects-slower-economic-growth-in-Western-Balkans.html

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