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Landmark Moment for Domestic Industry as Electric Panda Production Commences

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A stronger short-term revival of the domestic processing sector in the circumstances of a pronounced slowdown in the eurozone economies is unlikely. However, analysts from Macroeconomic Analyses and Trends (MAT) have noted that a positive reversal of the trend in the second half of 2024 is possible if a more massive production of an entirely new model of Fiat Panda is initiated in Kragujevac.

In the February edition of MAT, they highlight that the year-on-year decline in the physical production volume in November in the eurozone reached -6.8%, and in Germany alone, it was -4.9%.

“Since March 2023, when the first year-on-year decline was recorded, the economic downturn has been getting stronger. The problems are more complex in the processing sector, where the year-on-year decline is over seven percent. Additionally, the number of European countries with double-digit declines in production is increasing; for example, Hungary is experiencing a 13.7 percent contraction in industry,” noted domestic economists.

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Regarding Serbia, they emphasize that, unlike the second quarter of 2023 when the average monthly trend-cycle increments of the total industry oscillated around zero, industrial activity has slightly accelerated since July. As a result, the average monthly increments in production are expected to reach 0.29 percent by the end of the year.

“To some extent, this has indeed exceeded our expectations because our industry was primarily driven by the activity in the processing sector in the second half, which, despite geopolitical upheavals and external constraints, once again demonstrated significant adaptability and resilience. The key question that requires an answer is whether the contribution of investments and domestic private consumption will be sufficient to maintain its immunity to downturn external pressures throughout 2024,” explained the analysts in the MAT analysis.

They emphasize that a positive reversal of the trend in the second half of 2024 is possible if a more massive production of an entirely new model of Fiat Panda is initiated in Kragujevac.

“But that should not be discussed now; it should be addressed when the time is right. Until then, a tough fight should be waged for every plant and factory to maintain the current production level,” conclude the authors of MAT.

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It is worth recalling that the international consortium of vehicle manufacturers, Stellantis, confirmed in early December last year its decision to produce the future version of the Fiat Panda exclusively with electric propulsion in Serbia. The Panda is currently manufactured at the Pomigliano D’Arco factory near Naples, and the electric version is expected in mid-2024, as announced by Stellantis at that time.

According to data from the Republic Statistical Office processed by MAT, the growth of the processing industry in 2023 reached 0.7 percent compared to the previous year. The main contributors to this growth were the production of basic pharmaceutical products and preparations (0.91 percentage points), basic metals (0.64 pp), motor vehicles and trailers (0.34 pp), food products (0.24 pp), as well as “machinery and equipment, not otherwise classified” (0.23 pp).

However, domestic production has recorded a somewhat unexpected “positive” trend.

“In recent months, there has been a noticeable surge in the production of computers, electronic, and optical devices, and this sector has contributed to the growth of the processing industry by as much as 1.1 percentage points in the fourth quarter of 2023,” noted the authors of MAT.

However, they caution that this growth seems to be of an incidental nature.

“The growth is predominantly driven by the production of ‘smart meters.’ The project to install smart, digital meters, initiated by the Ministry of Energy, is time-limited and constrained by demand. It is noteworthy that this production is supported by an EU donation, which has provided approximately 110 million euros so far,” states the latest MAT analysis.

The extent to which developments in the domestic industry depend on the initiation of production of a new model in Kragujevac is evident in the current forecast, which suggests that industrial production at the end of this year could increase by two percent in December compared to the same month last year.

The forecast also predicts that the growth of the processing industry in the same period should be one percentage point, with a decline in exports of 1.5 percent and an increase in imports of eight percent.

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