The growth of the Serbian economy is about three percent

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The Government of Serbia should undertake a comprehensive and fundamental reform of public companies to make them financially sustainable and improve corporate governance, as well as prepare a legal framework to help energy-dangerous customers, says a new World Bank report.

The World Bank presented the regular economic report for the Western Balkans.

“The ongoing crisis in the domestic energy sector has once again pointed to the urgency of improving the management of public enterprises”, says the World Bank.

In the medium term, growth of around 3 percent per year is predicted for Serbia, the World Bank estimates, but with the emphasis on several risks that could have a negative impact on the macroeconomic prospects of the Serbian economy.

The first risk is inflation , because it is not known what will happen to the international prices of food, energy and key inputs, the second risk is the fiscal deficit , which may go up, depending on the performance of large energy companies, Lazar said at the presentation of the World Bank report. Šestović, senior macroeconomist for Serbia.

“If (companies) need more significant direct aid, all of this will add to the fiscal deficit,” emphasizes Šestović.

The third risk when it comes to Serbia, he says, is the issue of energy supply, that is, the availability of gas and electricity.

“It is something that does not depend only on Serbia and its energy companies”, says Šestović.

Before the outbreak of the war in Ukraine, projections indicated that the economy of Serbia would grow at a rate of between 4 and 4.5 percent per year.

“However, the war, the increase in prices on the world market and difficulties in the work of the EPS during the winter of 2021-22. led to a lowering of the growth forecast. “Taking into account the impact of these shocks, growth of 3.2 percent is predicted in 2022”, says the World Bank report.

The prospects of the Serbian economy primarily depend on the program of domestic reforms and its implementation, the report says.

“In addition, public finances can be affected by their potential obligations (which are currently covered by state guarantees), especially those related to the deterioration of the performance of public companies, as was recently recorded with EPS and Srbijagas.”

Lower projections for the Western Balkans

Despite the strong start when it comes to economic growth and employment in the first half of 2022, the Western Balkan region is now facing new shocks, said Nikola Pontara , director of the World Bank office in Serbia, at the presentation of the report.

“On the fiscal side, the measures implemented by governments in the fight against inflation and high energy prices, and in order to protect households and companies, have paid dearly. This especially applies to energy importers: Serbia, Kosovo and North Macedonia,” said Pontara.

In the report, the World Bank revised the growth projections in the region in 2023 to 2.8 percent. 

According to Pontara, this is due to the slowdown of the Eurozone economy, which is the source of demand for goods and services in the Western Balkans, and the source of investments.

According to him, the priority for governments should be the most vulnerable segments of society, but with the assurance that the measures implemented are targeted. 

In the medium term, governments should focus on structural reforms, which are key to growth.

According to Pontara, the crisis also indicated the importance of accelerating the green transition in the region towards the generation of cleaner electricity and green production and consumption.

Richard Record , the leading economist for the Western Balkans, says that the World Bank estimates that in the whole of 2022, growth for the entire Western Balkans will be 3.4 percent.

“All countries except Albania have double-digit inflation, if we look only at food prices, the growth is more dramatic”, he said at the presentation of the report. 

The record states that the first half of the year saw a recovery in spending and investment, and that employment levels were at historic levels.

“The level of employment in the Western Balkans is 46 percent, which is the highest we have seen, but it is less than in the EU, where employment is 61 percent”, he adds. 

This growth, when it comes to jobs, is mostly due to women returning to the labor market – young people and women were the most affected during covid, Nova Ekonomija writes.