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Serbia, Industrial production in lero

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Data on economic activity for January show recovery, but only at first glance, because the structure of that growth indicates a real problem, warn from MAT

The Serbian economy is struggling, like the rest of Europe, and the long-term pain of its partners abroad is beginning to catch up with it. 

When looking at the global data for January 2023, the first impression is that there has been a noticeable recovery in economic activity, as the total industrial production recorded a year-on-year increase of 4.1 percent. 

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However, they point out in the new issue of the Economic Institute’s “Macroeconomic Analysis and Trends” newsletter, when the structure of that growth is considered, this positive conclusion changes.

Then it can be seen that the increase in total industrial production was driven by growth in mining of 16.3 percent (including metal ore exploitation by 42.6 percent) and power industry production by 12.5 percent.

However, the manufacturing industry remained close to stagnation, recording an increase of only 0.2 percent. Year-on-year declines in January are large, production of basic metals 46 percent, chemical industry 18 percent, wood industry 15 percent…

Even the markedly increased production of computers, electronic and optical products of 31 percent, with smaller increases in some other areas, failed to pull out the average.

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The current seasonally adjusted index for January 2023, compared to December 2022, shows a decrease of 2.1 percent for the industry as a whole, and a decrease of 0.8 percent for the processing industry.

Consumers reduced their purchases

The drop in production is not the only thing currently troubling the Serbian economy. The decline in the standard of living of citizens due to inflation has consequences in that the volume of purchases has decreased.

The turnover of goods in retail trade in January 2023 was 18.4 percent nominally higher
than in the same month of the previous year. But the price war contributed to this, because in constant prices the increase is reduced to 1.8 percent. However, if traffic is observed by basic aggregates

Classification of activities, the nominal value of motor fuel sales increased the most, by 20.4 percent in current prices or 14.3 percent in constant prices.

Without that increase in fuel, the overall picture would be much darker. This can be seen from the value of the turnover of food, beverages and tobacco, which in monetary terms increased by 19.2 percent, as well as the turnover of non-food products by 16.3 percent, but in physical volume, the turnover fell.

In both cases, real sales fell by 0.5 percent in non-food products and by as much as 1.7 percent in the case of food sales.

What is even more worrying is that the process of falling is long. If the dynamics of current retail consumption is monitored through real seasonally adjusted data and trend-cycles, it will be seen that after the end of the first quarter of 2022, there is no longer any real increase, according to MAT.

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