Serbia, like all other economies, was in crisis this year, but achieved better results than most European countries, according to the latest 62nd issue of the Quarterly Monitor, published by the Faculty of Economics in Belgrade and the Foundation for the Development of Economic Science.
In the number presented online today, the decline in Serbia’s gross domestic product in 2020 is estimated at about 1.5 percent, which is significantly less than what is expected in the countries of Central and Eastern Europe (CEE), where a decline of about five percent and in the entire European Union, where a drop of about 7.5 percent is expected.
During the crisis, the report states, Serbia’s macroeconomic stability was not threatened at any time, and the payment of the minimum wage for most of the private sector over a five-month period mitigated and delayed the deterioration of the labor market.
It is pointed out that inflation has remained low, about 1.6 percent, on average, the dinar exchange rate is stable, and the current account deficit, although still relatively high, will decrease to about five percent of GDP compared to about seven percent of GDP from 2019.
The fiscal deficit, which amounted to about nine percent of GDP in 2020, was 1.5 percent of GDP higher than the average deficit in CEE countries.
Experts from the Faculty of Economics state that Serbia entered the pandemic with a relatively high growth rate, unlike most European countries whose economies slowed down significantly last year, while some were in a slight recession, which caused the fall in GDP to be low this year.
According to them, the second reason for the small decline in GDP is the high share of production of existential products in the structure of the economy, while the share of activities that are particularly hard hit by the crisis is low.
“Finally, a strong and indiscriminate fiscal stimulus, which resulted in a fiscal deficit of nine percent of GDP, along with an expansive monetary policy, mitigated the decline in GDP this year,” the quarterly monitor said.
When it comes to next year, it is expected that the Serbian economy could achieve a growth of 3-4 percent, which implies that the decline from this year will be fully compensated and that it will exceed the pre-crisis level of economic activity by about two percent.
Achieving pre-crisis GDP is possible on the basis of existing capacities, which means that no significant investments are needed for that.
The growth of the economy based on reaching the pre-crisis level of activity will be relatively modest, because the economy approached the pre-crisis level in the second half of this year, the authors of the Quarterly Monitor state, adding that increasing economic activity above the pre-crisis level requires new investments.
They also point out that the decline in investments this year by 10 percent, with the expected modest growth next year, indicates that economic activity in 2021 will not significantly exceed the pre-crisis new one.
As for the labor market, unemployment is expected to rise over the next year, due to layoffs in industries particularly affected by the crisis and stagnation in employment in most other industries.
“For now, it is more likely that the registered employment will decrease by several tens of thousands, than that several hundred thousand workers will lose their jobs,” the authors of the Monitor believe.
Real wages in the private sector are expected to stagnate or grow relatively modestly next year, while wages in the public sector will grow at a nominal growth rate of close to five percent, further widening the gap between public and private sector wages.
When it comes to inflation, it is expected that it will remain at a low and stable level next year and that it will be below the target level of three percent throughout the year.
It is estimated that the National Bank of Serbia will keep the exchange rate at a stable level by intervening in the foreign exchange market, which will contribute to keeping inflation low, but will negatively affect the country’s international price competitiveness.
In 2021, the growth of Serbia’s foreign trade is expected, but also the growth of the foreign trade deficit.
According to experts, foreign direct investments will remain at a low level because economic and non-economic risks will be high for most of next year, and the deterioration of financial performance of companies, potential investors, will affect the postponement or abandonment of investments abroad.
It is estimated that the fiscal deficit next year will be higher than the planned three percent of gross domestic product and will range between four and five percent of GDP.
The authors of the publication state that they expect that the growth of public debt in relation to GDP will be relatively small, so that the fiscal position of Serbia will remain stable, RTV reports.
