EC: Serbia's economic growth to accelerate to 4.2 pct in 2025 and 4.3 pct in 2026

BRUSSELS - Serbia's strong economic growth is projected to maintain its momentum in the coming years and accelerate from 3.9 pct in 2024 to 4.2 pct in 2025 and 4.3 pct in 2026, driven by domestic demand and foreign investment, according to the European Commission's Autumn 2024 European Economic Forecast, released on Friday.

"A robust labour market and further rises in real incomes are expected to continue driving private consumption, while strong foreign direct investment inflows and public investments support investment growth.

However, this trend contributes to an increase in imports, surpassing exports. The general government deficit is forecast to stay at around 3 pct in 2024-2026, with public debt projected to edge down to around 48 pct of GDP by 2026," the report says.

"After reaching 3.8 pct in 2023, GDP growth remained robust in Q1 and Q2 2024, increasing to 4.6 pct and 4.0 pct y-o-y respectively. It was boosted by domestic demand, notably investment and private consumption, which in turn pushed up imports by 8.5 pct in 2024-H1, surpassing the 4.4 pct growth in exports. Short-term indicators from Q3 suggest that a similar growth pattern persists, albeit with lower momentum. Domestic demand is expected to remain strong, supported by a robust labour market, consumer confidence, and rising real wages," it said.

"Domestic-demand-driven growth is forecast to extend into 2025 and 2026. This is likely to be further supported by a resumption in credit growth as banks have started to loosen their credit standards in the course of 2024 and the demand for corporate and household loans has likewise picked up," the report said.

"The labour market has continued to perform strongly over the first half of 2024. For the year as a whole, employment growth is expected to reach 0.8 pct and unemployment to edge down from 9.4 pct in 2023 to 8.7 pct in 2024. Rapid wage growth, at around 14 pct in 2024, is expected to moderate to around 7 pct by 2026 as inflationary pressures ease," the EC says.

"The average inflation for the year is forecast to be 4.7 pct, reflecting higher inflation in the first half of the year. Inflation is expected to remain within the central bank’s target band of 3 pct ±1.5 pps in 2025 and 2026, forecast to reach 3.7 pct and 3.5 pct respectively," the report also says.