EC Predicts biggest Serbia growth in the last decade

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The European Commission believes that in 2018 Serbia will record the fastest economic growth in the last ten years, which, according to the latest spring forecasts, will amount to 3.3 percent.

For the year 2019, the EC predicts that the gross domestic product of Serbia will increase by 3.5%. Both projections are at the level of the previous November report, ie the autumn economic forecasts of the European Commission for European countries.

EC experts expect that domestic demand in Serbia will further strengthen this year guided by the growth in consumption and investment activities, with the support of a continuous inflow of foreign direct investment.

According to their projection, Serbian exports will remain strong, although the net contribution of exports will grow this year as well, given the stronger growth of imports. According to the forecast, exports will jump by 9.7 percent this year, and the events by 8.8, while imports in 2018 will increase by 9.4 percent and the next by 7.6 percent.

It is predicted that inflation will gradually return to the central level within the targeted range of the central bank of 3.0 percent plus / minus 1.5 percent. Serbia, according to the EC, will continue to have a budget surplus, but draws attention to the fact that there are still fiscal risks that should not be ignored.

The unemployment rate in Serbia will fall to 12.1 percent from last year’s 13.6, according to the EC projection this year, and next year will amount to 10 percent.

“Short-term indicators point to the acceleration of Serbia’s economic growth at the beginning of 2018, and this is supported by the fact that industrial production in the first two months achieved strong growth and accelerated retail sales, which speaks about the growth of domestic consumption,” the report says .

Private consumption will be the second key driver of economic growth, the document noted, adding that higher employment and a slight increase in salaries have already contributed to the acceleration of economic expansion.

“After an increase in foreign trade imbalances last year, it is expected that it will remain stable this year, but at an elevated level. Although it is fully covered by foreign direct investment, the volume of the current account deficit indicates a major economic vulnerability. Fluctuations in raw material prices and turnarounds on international capital markets are still the main risks to economic growth forecasts, “the EC said.

It is also projected that public debt, not counting the potential debt on the basis of restitution, will fall and remain below 60 percent of GDP. As it is specified, in 2018 public debt will amount to 58.9 percent of GDP, and in 2019 it will be 55.9 percent of GDP.

Nevertheless, it is estimated that good fiscal outlook and rising spending pressures will continue to test the government’s commitment to maintaining strict control of current spending, especially in terms of public sector wage and pension costs.

The ending of the standby arrangement with the IMF and the dysfunctional system of fiscal regulations also contribute to uncertainty regarding the future fiscal policy course. In addition, large tax and public administration reforms and state-owned enterprises, with potentially significant budgetary effects, are still not completed, according to the European Commission Spring Economic Forecasts, in the part dedicated to Serbia.

Regarding the countries of the region, Croatia, according to the EC estimates, is expected to grow by 2.8 percent this year, and next year by 2.7 percent, Slovenia will grow by 4.7 percent and 3.6 percent respectively.

For Macedonia this year is forecast to grow by 3.1 percent and a 3.3 percent event, for Montenegro 3.0 percent in this, or 2.9 percent in the next year. Bulgaria can hope to grow by 3.8 percent in 2018, the next from 3.7 percent, Romania 4.5 percent and 3.9 percent next year, while Albania is 3.6 percent and 3.9 percent, respectively.

Source: RTS, Tanjug

Photo: Pixabay