Economic growth in the Western Balkans region is slowing and in 2019 the average GDP growth will be 3.2 percent, according to a presentation by the World Bank’s Western Balkans Report entitled “Growing Uncertainty”.
For Serbia, the World Bank expects growth of 3.3 percent this year, which is slightly below the 3.5 percent forecast by the Government of Serbia and the earlier World Bank projections. According to Galina Andronova Vinselet, World Bank’s macroeconomic policy manager for Europe, economic growth is slowing down despite higher government spending in the region.
She also warned of growing imbalances. This is especially true of external imbalances as exports slow down due to the slowdown in the world economy.
“We currently have a global slowdown in economic activity, the largest since the global crisis. Global growth estimates are down from 3.1 percent to 2.5 percent. For Europe, forecasts are even lower. In these circumstances, wage increases will reduce competitiveness, and export competitiveness will be one of the top priorities of all economies, “Andronova said.
With regard to external imbalances, Serbia’s current account deficit increased by more than 50 percent compared to last year.
Lazar Sestovic, a World Bank economist, points out that GDP has slowed in the last four quarters, despite higher spending, so investment has started to decline.
“Net exports have made a positive contribution to growth until 2017, and have since subtracted from growth. We expect this negative contribution to be even greater in 2020. The deterioration in the global economy will affect, in addition to the cost of borrowing, the placement of our goods and the inflow of foreign direct investment. The trade deficit has been growing for 2.5 years. So far, the deficit has been financed by foreign direct investment. The trade deficit accounts for about two-thirds of the current account deficit, and one-third outflow from dividends on foreign direct investment, “he estimated.
In addition, the Corporate Purchasing Manager Index (IPM) shows that almost all countries in Europe expect less economic activity, with German managers being the most pessimistic. Sestovic notes that this will affect our exports as a similar crisis in Italy last year caused our exports to this country to be reduced by about ten percent.
This effect can be further amplified by the FDI they produce for European markets. Particularly prominent here is our auto parts industry, which has become a serious supplier to car manufacturers, first and foremost in Germany. Sestovic points out that since the beginning of the year, car production in this country has been reduced by one million, the biggest decrease by 2009.
“The risks are large, global conditions are worsening, and we have not yet seen the effects of Bregzit and customs between the US and China. That is why the Ministry of Finance should take into account that we have reservations in case the situation continues to worsen, “Sestovic said, commenting that the Fiscal Strategy stated that public sector wages would grow in line with nominal GDP and budget rebalance they are increased significantly more. The World Bank projections for Serbia’s GDP growth in 2020 is 3.9 percent, while the Western Balkans average will be 3.6 percent.
Galina Andronova pointed out that employment growth is a positive trend throughout the region. According to her, 150,000 new jobs have been opened this year, one-third of which are for young people. In Serbia, unemployment has dropped to about 10 percent, which, according to Sestovic, is the lowest since the Labor Force Survey. According to the survey, about 20,000 jobs were created in Serbia in the previous year, which is in line with the records of social security funds.