Growth remains subdued
Statistical Office flash estimate indicates Serbian economy grew 0.7% y/y in 1Q23, thus relatively in line with our expectations (EBCe 1% y/y). While we have to wait for the end of May for the detailed structural performance, high frequency data point to further slowdown of domestic demand activity, which remains under pressure from still high inflation. On the other hand, trade balance data surprised positively, with strong double-digit growth on the exports side, and relatively flattish import performance, suggesting a strong positive contribution from the external side.
As largely expected, economic growth slowed sharply in the last two quarters. Monetary tightening, high producer prices and narrowing real disposable income are all factors curbing growth. There is still a large degree of uncertainty. While recent updates of global outlooks paint a slightly more positive picture than a couple of months ago, growth remains fragile. We expect similar performance of the Serbian economy in the 2Q as well, while headline figures could grow in 2H23 due to base effects and expected easing of inflation pressures. For now, we are comfortable with our FY23 GDP assessment of 1.6% y/y with risks largely balanced.
Source: Erste Group
