In the first five months, Serbia recorded a current account deficit of only 191 million euros, 13.2 times less than in the same period last year, when the deficit amounted to 2.5 billion euros. This unusual result for the domestic economy, which usually records significantly larger deficits, is the result of several factors, primarily the drop in imports and energy prices.
From January to May, the export of electricity increased year-on-year three times, while at the same time the import decreased by 40 percent. The surplus in electricity trade amounted to around 300 million euros this year until the end of May. At the same time, the value of imported natural gas was lower than in the same period last year by around 440 million euros,.
The total deficit in foreign trade for five months was around 2.7 billion euros (4.5 billion in 2022), and almost half of this deficit was compensated by the surplus in the export of services. The surplus in the exchange of services for five months amounted to 1.3 billion euros, 65 percent more than in the same period last year.
The export of ICT services led the way, reaching EUR 1.34 billion in five months, which is 41 percent more than in five months of 2022.
The editor of the journal Macroeconomic Analysis and Trends (MAT) Ivan Nikolić said that not only is the import of energy, but also of other products, primarily raw materials, decreasing. “Serbia has never had a lower deficit than this 191 million euros. This is also reflected in the growth of foreign exchange reserves, as the National Bank of Serbia (NBS) purchased a net of 2.3 billion euros as of Friday. This is partly a consequence of lower needs for foreign exchange for imports,” said Nikolić.
He added that any loosening of the exchange rate by the central bank at this moment would lead to a drastic strengthening of the dinar, and “the question is who needs it now”.
It is interesting that, although the value of exports is increasing, it is entirely related to higher prices, and the exported quantities of products are stagnating or even declining. On the other hand, the account of secondary income shows a strong growth in remittances from workers abroad. Namely, inflows from workers’ remittances at the annual level increased by 30 percent and reached 1.68 billion euros, gross. Total personal transfers, which include foreign pensions, social benefits and gifts that entered the country in five months, amounted to 2.1 billion euros.
For the sake of comparison, net direct investments in this period amounted to 1.66 billion euros, which otherwise increased year-on-year by as much as 58.2 percent (in the net amount of 1.75 billion euros). According to the recent statements of the President of Serbia, Aleksandar Vučić, an inflow of foreign investments of 2.1 billion euros was recorded in six months.
It is characteristic of remittances that they increase in times of crises, because people from abroad send more money to their families. One of the causes may be inflation, which reduced the purchasing power of residents and increased their need for help from family members working abroad.
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