The National Bank of Serbia (NBS) has increased Serbia’s economic growth projection for this year to 6.5 percent compared to the May estimate of six percent.
“In the medium term, we expect gross domestic product (GDP) growth in the range of four to five percent, while in previous projections we expected growth of four percent,” reads the August Inflation Report, whose presentation is just started in the NBS.
The governor stated that, although the risks from the international environment are still present, the Serbian economy continues to grow faster than initial expectations, which, she said, was greatly influenced by the timely adoption of a comprehensive package of well-balanced monetary and fiscal policy measures.
Tabakovic reminded that the pre-crisis level of GDP was already reached in the first quarter of 2021, one quarter earlier than expected, and added that the recovery continued in the second quarter with a growth rate of 13.4 percent year on year, which is partly due to low results.
“Starting from the analysis of planned capital projects in road, railway, energy and communal infrastructure in the next ten years and their direct and indirect effects on other parts of the economy, we revised the projection of economic growth in the medium term from four percent to between four and five percent,” the NBS governor said.
As she explained, the central projection of GDP growth in the medium term is now 4.5 percent, and the overall risks of the NBS projection are still assessed as symmetrical.
According to the new projection, which takes into account the estimated effects of planned infrastructure projects, the share of construction in GDP should reach a level of around seven percent in the medium term, instead of the previously expected six percent.
“At the same time, the share of total fixed investments in the nominal gross domestic product in the next few years should reach and exceed the level of 26 percent, after which, according to our projection, it will remain at a high level for a longer period,” she added.
When it comes to the growth of consumer prices, the NBS expects that year-on-year inflation in the second half of this year and in the first quarter of 2022 will move in the upper half of the target range of three percent plus / minus 1.5 percent.
From the second quarter of 2022, the first slowdown in inflation is expected, and then its movement in the lower half of the target range.
Tabakovic pointed out that the disruption in the global supply chain due to restrictive measures caused an increase in demand that the existing supply could not meet, which led to higher prices for oil, primary agricultural products and other goods on world markets, and that we have rising inflation in all countries of the world.
“Although higher than it was at the beginning of the year, inflation in Serbia is lower than in most countries in the region with the same monetary policy regime. The preserved stability of the exchange rate and anchored inflation expectations of the financial sector and economy contribute the most,” she said.
After reaching a level of 3.6 percent in May, year on year, inflation slowed to 3.3 percent in the next two months, and from the second half of next year until the end of the projection period should move again in the lower half of the target range, ie in the range of 1.5 to three percent, concluded NBS Governor Jorgovanka Tabakovic, Kamatica reports.
