The Ministry of Finance recently published an analysis of the contribution of real GDP growth rates for 2023 with projections for 2024, in which an increase in the created gross value added (GVA) is expected in all economic sectors except agriculture, which is expected to decrease by three percent.
Should the potential “failure” of agriculture worry us? While agroanalyst Branislav Gulan indicated that it seems as if agriculture is losing its strategic importance in the eyes of domestic policy makers, economist Ivan Nikolić emphasizes that the fact that agriculture will most likely not contribute to GDP growth does not call into question its key importance for the country’s food security, nor its strategic nature.
“The uncertainty in the projections is far greater than usual due to the nature and scale of the shocks at the global level.” The channels through which they can potentially affect the domestic economy are numerous, often linked in a chain, and the strength of the potential shocks is such that they can greatly affect medium-term developments,” the Ministry of Finance pointed out in the introduction to the GDP growth projections in the period from 2024 to 2026.
In this year, as they say, the service sector will play the role of the dominant carrier of economic activity growth.
“Growth should be diversified and achieved in almost all service activities, and especially strong in trade and transport, tourism and hospitality, with continued good results in the ICT sector and professional-technical services”, says the current “Current Macroeconomic Trends”.
The industry will continue to grow during 2024, primarily due to the activation of new production capacities, but also the expected recovery of external demand, and construction should also record growth due to the continuation of infrastructure works, as well as a larger volume of private investments.
Why is agriculture “pulling into the red”?
“For the agricultural sector, assuming an average season in 2024, a drop of about three percent is projected,” the document states, however, indicating that a negative contribution to GDP growth is expected from that sector.
Agroanalyst Branislav Gulan previously told Biznis.rs that it seems to him that agriculture is losing its strategic importance in the eyes of domestic policymakers, who prefer and more often look at the successes and potentials of other sectors, such as services and IT.
“The fact is that the Agriculture Development Strategy, which is entering its tenth and last year of implementation this year, has not produced any results.” In the past three and a half decades, agriculture grew at an average rate of only 0.45 percent, and only this year the agricultural budget “transferred” five percent of the total budget. We are witnessing that the quality of the soil is degrading, because livestock production has dangerously declined, so today we have fewer pigs than after the Second World War, while only about 1.4 percent of agricultural land is irrigated,” warned Gulan for Biznis.rs in an interview about the protest. farmers in Serbia and EU countries.
However, even when agriculture does not contribute to GDP growth, it does not lose its strategic importance, which is on the same level as energy or the state’s defense system, emphasizes economist Ivan Nikolić.
“In the current projections, it was taken into account that agriculture previously had a neutral contribution to GVA and GDP growth in the long term. Also, the share of agriculture in GDP is decreasing while other sectors are growing, in our country as well as in other European countries, but this does not mean that it has no strategic importance, especially in today’s uncertain geopolitical circumstances. Its position is evidenced by the fact that it is the most important item of the EU budget, as well as of the Serbian republic’s coffers,” explains Nikolić, who is also the editor of Macroeconomic Analysis and Trends.
