The World Bank forecasts better prospects for Serbia for 2020, so in the updated, October report on the economic prospects of the countries of the world in the conditions of the Covid-19 pandemic, it reduced the initial forecast of our country’s GDP decline from 3.5 to 3 percent.
As for the surrounding economies, for comparison, the World Bank estimates that the biggest decline this year will be in Montenegro, as much as 12.4 percent, and the Kosovo economy – 8.8 percent.
According to WB projections, Albania expects a decline of 8.4 percent, Croatia of 8.1 percent, Romania of 5.7 percent, Bulgaria of 5.1 percent, Northern Macedonia of 4.1 percent and Bosnia and Herzegovina of 3.2 percent.
The World Bank states that the Serbian economy, after several years of solid growth, has entered a recession caused by the Covid-19 pandemic, which has paralyzed economies around the world.
The immediate negative impact on the population and economy in Serbia has been mitigated by a large fiscal package of about 13 percent of GDP,” the international creditor said.
It is added that thanks to that package of measures, there was no significant increase in unemployment, and that the fall in GDP in the second quarter of 6.4 percent on an annual level was smaller than in neighboring countries.
For next year, the World Bank forecasts more moderate growth of the Serbian economy at a rate of 2.9 percent, or 1.1 percent slower than the June projection, and at the same time expects that GDP growth will return to pre-pandemic levels in 2022-23.
This medium-term perspective, according to the report, crucially depends on international developments, including the influence of Covid-19, but also on the pace of structural reforms and political developments.
According to the World Bank, the most important thing for Serbia is to continue working on removing bottlenecks for the growth of the private sector, ie to remove obstacles to a better business environment and reduce bureaucracy.
According to the World Bank, the negative effects of the pandemic will lead to a small increase in poverty in our country this year, with potential further negative risks.
The report says that after several years of continuous poverty reduction in Serbia, a slight increase is expected from last year’s 18.2 percent to 18.9 percent this year, solely due to risks related to the duration and depth of the crisis caused by the pandemic and the implementation of measures for it.
It is also stated that Serbia immediately reacted to the pandemic with a package of fiscal and monetary measures. The effect was reportedly favorable, but had significant fiscal costs, which could reflect a sharp rise in public debt and limit room for future stimulus packages.
The report recommends intensifying reform processes to restore the economy to sustainable growth and to provide jobs and incomes, while strengthening resilience to external shocks.
The World Bank believes that the focus should be on improving the business environment and governance in order to increase private investment, as well as efforts to raise the quality of infrastructure.
At the same time, it warns of the problem of aging and declining population in Serbia, which could result in a reduction in the available labor force, which would potentially disrupt the competitiveness of the Serbian economy.
The document also points out that the impact of climate change – more frequent and severe droughts and floods – could seriously affect agriculture and food production and significantly increase infrastructure maintenance costs.
Progress in overcoming these challenges crucially depends on the speed of the EU accession process, with the acceleration of this process could enable the timely adoption of structural reforms and faster and inclusive economic growth, the World Bank concludes, Novosti reports.
