Drought takes its toll on Serbia’s economic growth

Published on 28. August 2017., News

Serbia plans to compensate for lower than planned GDP growth in 2017. Although, according to officials, economic indicators are good, the drought has taken its toll and forced the government to change its estimates. EURACTIV.rs reports.

On 21 August, the Serbian government admitted what economists and analysts had been warning about – that GDP growth in 2017 would not reach the projected 3% after 2.8% growth in 2016.

Prime Minister Ana Brnabić is now hoping for growth of 2.5% in 2017, whereas President Aleksandar Vučić is slightly more optimistic and expects 2.6 – 2.7%.

The World Bank and the International Monetary Fund earlier this year estimated the growth of Serbia’s GDP in 2017 at 3%, while the European Commission’s estimate was 3.2%.

According to the prime minister, the short-term measures the government has planned in order to compensate for drought-incurred losses could spur additional growth by the end of the year.

“The short-term measures may bring additional GDP growth of 0.2 to 0.3%. The good thing is that all the other economic indicators are good. Exports are growing 10-12%, the processing industry 6.8%. In that sense, the indicators are such that we have a growing and dynamic economy,” the prime minister told reporters.

Brnabić underscored that the short-term measures were ready, including the cleaning of canals and subsidizing the purchase of tractors, machines and equipment.

“Since our budget is in excellent condition, with very good fiscal discipline and a surplus, we can invest in short-term measures that will affect growth and are good in terms of capital investment. We will look at the projects that are ready at this time. We will invest more than we thought we would invest over the course of 2017,” said Brnabić.

Economists, however, are not convinced that the measures will yield any serious results, and do not think it is possible to make up in the second half of the year for the poor results achieved in the first six months.

“The results the Serbian economy achieved in the first half of the year are disappointing and there is almost no possibility of making up for them with good results in the second half of the year, especially bearing in mind the severe drought,” University of Belgrade Economics Professor Milojko Arsić told N1 TV, adding that he did not expect the Serbian economy to grow more than 2% by the end of the year.

Meanwhile, the Serbian president has told the country not to worry because production is rising, the coverage of imports by exports is the biggest in the region, the budget has a surplus and the public debt is decreasing. He has also pointed out that Serbia has based its growth on investment, which, in his words, is “the healthiest kind of growth”.