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EBRD revises Serbia’s GDP growth forecast upwards: Strong growth expected ahead

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The European Bank for Reconstruction and Development (EBRD) has upgraded its growth forecast for Serbia’s gross domestic product (GDP) to 3.5 percent in 2024, up from the previous estimate of 2.5 percent made in September 2023.

This upward revision for 2024 is attributed to robust growth in the first half of the year, fueled by domestic demand and investments backed by the European Union (EU). Factors contributing to this growth include a decline in inflation and a relatively accommodative fiscal policy, according to the EBRD.

Looking ahead, the EBRD anticipates further growth, projecting a GDP growth rate of 4 percent in 2025. These forecasts are part of the EBRD’s Regional Economic Outlook report, which predicts a slowdown in growth across the Western Balkans to 2.5 percent in 2023 from 3.4 percent in 2022, mainly due to persistent high inflation dampening domestic demand and weaker demand from the EU.

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Early indicators such as industrial production, real retail trade, and tourism in the initial months of 2024 suggest strong economic expansion in Serbia. Inflation is forecasted to return within the central bank’s target range by year-end, supported by continued tight monetary policy. Additionally, the deficit has been decreasing in the early months of the year, driven by rising exports of goods and services coupled with a decline in imports, as per the EBRD announcement.

Furthermore, Serbia is in the process of finalizing the third and last revision under the International Monetary Fund’s stand-by arrangement, which, upon approval by the Board, would grant the Government access to around 400 million euros. However, Serbian authorities view this program as a precautionary measure, given the country’s robust reserve and fiscal buffers, along with progress in addressing macroeconomic imbalances.

Looking forward to 2025, the expected acceleration in growth to 4 percent is foreseen to be fueled by increased household consumption, public investment, and a continued decline in inflation, as well as preparations for EXPO 2027.

The EBRD, as the primary institutional investor in Serbia, has played a significant role, with investments exceeding 9 billion euros across 354 projects, primarily in the private sector. Its focus in Serbia remains on bolstering private sector competitiveness, facilitating the transition to green energy, and supporting sustainable infrastructure.

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