The International Monetary Fund (IMF) calculates that Serbia’s GDP will grow by 2.3 percent this year, the National Bank of Serbia expects growth in the range of two to three percent, the Government of Serbia hopes for growth of 2.5 percent, and for now the most optimistic projection is the European Bank for Reconstruction and Development – admittedly from September last year – which says that the GDP of our country will grow by 3.3 percent this year.
Milojko Arsić, editor of the “Quarterly Monitor” and professor at the Faculty of Economics in Belgrade, previously told Biznis.rs that he expects GDP growth of two percent in 2023.
What data and trends are these growth forecasts based on?
“We project the real GDP growth of Serbia at 2.5 percent for 2022 and 2.3 percent for 2023, with the caveat that the risks for these projections are the impact of the drought on the agricultural sector, the increase in energy prices, as well as the lower projected growth with Serbia’s European trading partners”, says the report of the members of the IMF mission, who negotiated with the Government of Serbia on concluding the current stand-by arrangement.
“Looking ahead, a modest recovery of GDP growth to three percent in 2024 and a return to four percent growth in the medium term is expected,” the IMF forecasts. In the analysis of last year’s events, they indicate that economic growth in Serbia was strong, and that it exceeded four percent in the first half of 2022.
“However, we expect a slowdown in the second half of the year, mainly due to weaker demand from EU trading partners together with higher commodity prices, especially energy, supply chain disruptions and severe summer drought.” For both 2022 and 2023, we project a real slowdown in GDP growth to two to three percent due to the unfavorable international environment and the ongoing multidimensional crisis, while after 2023 we expect growth to accelerate to pre-crisis levels, as the effects of the conflict in Ukraine on external demand weaken. and how the planned infrastructural projects will be implemented”, says the report of the IMF mission.
In November, the National Bank of Serbia (NBS) corrected its GDP growth projection for 2022 and 2023 by stating that it expects growth to be in the range of two to three percent in both years.
“Due to the expectation that during 2023 economic activity in the euro zone, as well as in other countries that are our important trading partners, will be significantly weaker than expected, but also due to a smaller effect of the transferred tendencies from this year (the so-called carry over effect ), for the year 2023, we lowered the growth projection of Serbia’s gross domestic product, also to a range of two to three percent,” said Governor Jorgovanka Tabaković at the presentation of the November Inflation Report.
“Under the assumption of a significant reduction in geopolitical tensions and the recovery of external demand, as well as due to the planned implementation of investment projects, primarily in the field of road, railway, energy and communal infrastructure, from 2024 we expect an acceleration of economic growth, first to around 3.5 percent, and then a return to the pre-pandemic growth path of around four percent per year in the medium term”, stated Tabaković at the time.
Domestic economists gathered around the “Quarterly Monitor” expect that the GDP growth of Serbia in 2023 will amount to around two percent.
“Serbia achieved a negative growth rate in the third quarter of this year compared to the previous quarter, and that is when the influence of the season is excluded. If this happens again in the fourth quarter, our country would formally be in a ‘shallow’ recession, like the one expected in many European countries,” Milojko Arsić, a professor at the Faculty of Economics in Belgrade and editor of the “Quarterly Monitor”, told Biznis.rs.
Explaining the growth forecast, Arsić said that our country will enter the new year with a minimal or negative growth rate, while at the same time restrictive monetary policy will continue in Serbia and in Europe, so high interest rates are expected to bring down investments and consumption.
“Also, high inflation is still expected in the first half of the year, and there is also the risk of rising energy prices and their shortage,” added Arsić.
Of all the mentioned forecasts, the most optimistic for Serbia is the EBRD growth forecast – but because it has not been “updated” since October 2022.
“It is expected that the economy of Serbia will continue to grow at a slower pace of about 3.3 percent in 2022 and 2023.” Serbia is not immune to the indirect effects of the war on Ukraine. This includes the expected slowdown of the export markets of the Eurozone, which would affect the large production sector of Serbia, as well as the effect of rising food and energy prices on world markets, which will burden the budgets of households, utility companies and the state. The continuation of significant public investments is good for Serbia’s economic prospects, but the long-term energy crisis will also mean the outflow of money from the budget,” the EBRD warned last fall, Biznis writes.
