According to the Quarterly Monitor report, it is expected that the gross domestic product (GDP) in the upcoming period will be similar to the level of the previous year. This means that significant growth or decline in GDP is not anticipated during this period.
Regarding inflation, according to the same data, the inflation rate in Serbia stands at 12.4 percent. This represents a significant increase in inflation compared to previous periods. The National Bank of Serbia (NBS) is implementing a restrictive monetary policy to counteract high inflation and bring it within the target range.
It is important to note that these data and projections are subject to change based on the economic situation and measures taken to reduce the risk of high inflation. The NBS will continue to monitor and assess the situation in order to implement appropriate policies and measures to maintain stability and achieve objectives such as low inflationary pressures and sustainable economic conditions.
Declining inflation, moderate economic recovery, and reduced trade deficit are the trends in the Serbian economy during 2023. The basic trends are similar to those observed in European countries, although Serbia has higher inflation and faster GDP growth. According to the latest Quarterly Monitor report by the Faculty of Economics in Belgrade, GDP growth in Serbia is projected to be around 2.3-2.4% in 2023, similar to the previous year’s growth rate of 2.5%.
As stated, the growth of economic activity this year has been significantly influenced by one-time factors such as the recovery of agriculture from last year’s drought, strong growth in electricity production due to the resolution of issues in the power company (EPS), favorable hydrological conditions, and high growth in construction.
A growth rate of approximately 3% in economic activity is forecasted for the next year, which represents a relatively small increase compared to this year’s growth. However, this increase is still significant considering the absence of the one-time factors present this year.
Milojko Arsić, a professor at the Faculty of Economics in Belgrade, has stated that if political instability in Serbia continues or relations with key trading partners worsen, it would further negatively impact Serbia’s economic growth.
The average inflation rate in Serbia for this year is expected to be around 12.4%, making it the third-highest inflation rate in Europe (behind Hungary and Turkey).
“It is certain that in the long run, we need to harmonize electricity and gas prices with those in our surrounding countries. We simply do not have new technology that would allow us to produce electricity at a lower cost. Increasing the price of electricity is necessary to ensure current maintenance, revitalization, and new investments,” said Arsić, adding that EPS should invest in renewable energy sources as it is one of the largest polluters.
One of the significant factors contributing to the decrease in inflation is the decline in energy prices and other primary materials on the global market, as well as a reduction in food prices. These factors have alleviated inflationary pressures in Serbia.
The reduction of the trade deficit is also a positive trend in the Serbian economy, which can be attributed to export growth supported by a strong export sector and a decrease in imports.
The economic recovery in 2023 is primarily a result of one-time factors, such as agriculture recovery, electricity production growth, and construction industry expansion. However, a slightly lower growth rate is expected for the next year due to the absence of these one-time factors.
It is important to note that further political instability or worsening relations with key trading partners could have a negative impact on Serbia’s economic growth. Therefore, political stability and maintaining good trade relations with other countries are crucial economic factors for further growth and development.
Regarding inflation, the average inflation rate for this year is expected to be around 12.4%, ranking as the third highest in Europe. High inflation can negatively affect the living standards of citizens and economic activity. One of the factors influencing inflation is the increase in electricity prices.
Professor Arsić emphasizes that the increase in electricity prices is necessary to ensure current maintenance, revitalization, and new investments in the energy sector. Additionally, investment in renewable energy sources can have a positive impact on the environment, especially given that EPS is one of the largest polluters.
In summary, the trends in the Serbian economy during 2023 include declining inflation, moderate economic recovery, and reduced trade deficit. These trends are similar to those observed in European countries, although Serbia has higher inflation and faster GDP growth. However, political stability and maintaining good trade relations with other countries are key factors for further growth and development in Serbia.
As stated at the presentation of the Quarterly Monitor, it is expected that the National Bank of Serbia (NBS) will continue to implement a restrictive monetary policy in the coming months in order to bring inflation within the target range.
Arsić noted that maintaining interest rates at the current high level for the next few months is necessary because inflation in Serbia was the highest in Europe in November.
Another reason for maintaining a restrictive monetary policy is that core inflation, which reflects the impact of systemic factors such as fiscal and monetary policies and wage movements, remains high.
“The reduction of NBS interest rates would be macroeconomically justified when both overall and core inflation enter the target range. Premature easing of monetary policy restrictions would result in slower inflation reduction, which is macroeconomically undesirable,” was stated at the report presentation.
Sign up for business updates & specials
