The European Commission (EC) has increased its projected growth of Serbia’s economy for this year to 4.1 from 3.3 percent.
This happened in the latest, fall report, while the initial figure was published in the spring report on EU’s economic forecast.
The EC has also increased its forecast for Serbia’s GDP growth in 2019 from 3.3 to 3.8 percent – the same for 2020.
The section of the report dedicated to Serbia, entitled, “Forging ahead,” states that “economic growth shifted up a gear to nearly 5 percent (year-on-year) in the first half of 2018. The outlook appears strong and growth should remain vibrant despite the forecast slight moderation.”
“Investment is expected to be robust and domestic consumption to receive a further boost from rising employment and income. Financing conditions and fiscal policy are forecast to be supportive of growth. Strong domestic demand and worsening terms of trade, however, are set to push up inflation and external imbalances,” the document added.
The government budget surplus is expected to remain.
“This strength has allowed the government to start unwinding temporary pension cuts, which were introduced at the height of the crisis. Part of the fiscal space in 2019 is planned to be used to increase public wages and boost capital expenditure,” the report said, and added:
“While the budgetary stance is projected to be supportive of growth, the overall budget deficit is nevertheless forecast to remain close to balance. This would ensure further reduction of government debt to levels approaching 50 percent of GDP by the end of 2020.
The good fiscal performance is expected to be further supported by the implementation of long-standing reforms of the tax and public administration, and by completing the restructuring and privatization of major state-owned enterprises, the EC said.
These and other key structural reforms, including strengthening of the system of fiscal rules, are also at the center of Serbia’s new agreement with the IMF, it added.
“The growing economy is expected to stimulate further employment gains and unemployment is forecast to fall to its lowest level in decades. These conditions, in conjunction with negative terms of trade developments, are forecast to push inflation up slightly, closer towards the midpoint (3 percent) of the central bank’s target band. The same factors are also set to contribute to the expected widening of external imbalances,” the report said.