EC report projects Serbia to register 1.9 pct GDP growth in 2023

BRUSSELS - Serbia will see 1.9 pct GDP growth this year and 3 pct growth in 2024, according to the European Commission's Spring 2023 European Economic Forecast, released on Monday.

"Economic growth is projected to slow to 1.9 pct in 2023, mostly on the back of decelerating private consumption growth as still high average inflation dents real disposable income," the report says.

"Despite reduced trade dynamics with Serbia's main partners in the EU, the contribution of net exports to growth is expected to improve due to decelerating imports and increased export performance supported by recent foreign direct investment in the tradable sector. GDP growth in 2024 is projected to be mostly driven by private consumption and some pick-up in investment," it also says.

"Inflation continued its steady increase in 2022 and early 2023, reaching 16.2 pct y-o-y in March. It was initially driven by energy and food prices, but following persistent cost-push pressures to other industrial products and to services, core inflation has accelerated and accounted for 70 pct of consumer price inflation in March 2023. After an expected peak in spring 2023, inflation is projected to decelerate, partly due to base effects, from mid-2023 onwards, leading average annual inflation to broadly stabilise in 2023 and to return to single digits in 2024, supported by the effects of international and domestic monetary tightening and favourable commodity price developments," the report adds.

"The general government deficit decreased by 1 pp to 3.1 pct of GDP in 2022. The deficit-reducing impact of a lower volume of fiscal support measures, lower investment spending, strong revenue performance and the short-term impact of high inflation on real expenditure was only partially offset by high capital transfers to state-owned enterprises in the energy sector to finance costly gas and electricity imports. Supported by lower needs for energy-related capital transfers, the deficit is forecast to gradually decrease in 2023 and 2024. The general government debt-to-GDP ratio continued to fall to 55.6 pct in 2022, mostly as a result of very high nominal GDP growth. The ratio is projected to gradually decline further, mainly due to the denominator effect amid a continued robust increase in nominal GDP."

"Supported by strong employment growth in the first half of the year, the unemployment rate fell to 9.4 pct in 2022. It is projected to continue falling in 2023 and 2024, albeit at a more moderate pace, in line with relatively resilient employment growth," the report says.