These days, international financial institutions have come out with their autumn economic estimates and have increased the growth projections of Serbia’s GDP, but they are still not as optimistic as the Government of Serbia.
The World Bank announced yesterday that it expects the growth rate to reach six percent, and a few days ago, the International Monetary Fund improved its forecast from six to 6.5 percent in its autumn world economic outlook. Even the otherwise conservative Vienna Institute for International Economic Studies (WIIW) increased its forecast from six to 6.6 percent the day before yesterday.
The Serbian government, on the other hand, believes, judging by the report on current economic developments published monthly by the Ministry of Finance, that this year the real GDP growth will amount to as much as seven percent.
Looking only at 2021, several European and even regional economies will have a better result than ours, but if we take into account that last year our economy was reduced by only one percent, and some in the region by more than 10 percent, we still do not fare badly.
According to the report of the World Bank, our economy is expected to return to pre-crisis levels, and in accordance with that, they estimate growth of 4.5 percent for next year, and four percent in 2023.
The World Bank points to the need to remove bottlenecks for private investment, primarily the deterioration of public administration, the labor market, infrastructure and the tax system, as well as the education system, which creates skills that are not in line with the labor market.
They point out that with limited space for future state aid packages, structural reforms are necessary to return the economy to sustainable growth.
By the way, they have improved the prospects for the entire region of the Western Balkans, so the projected GDP growth in 2021 will amount to 5.9 percent, after a fall of 3.1 percent in 2020. Next year, a growth of 4.1 percent is predicted, and then a slowdown to 3.8 percent in 2023.
These days, the representatives of the state are holding talks with the IMF mission within the first revision of the new advisory arrangement Instrument for Policy Coordination, which started to be implemented in June 2021 and will last until the end of 2023.
At the meeting with Prime Minister Ana Brnabic, the head of the IMF Mission, Jan Kes Martijn, announced that the Fund increased the growth projection to 6.5 percent, and to 4.5 percent next year. According to him, the Serbian economy is recovering from the crisis caused by the corona virus pandemic with good dynamics, and the economic results are better than expected.
The Vienna Institute for International Economic Studies warns of three dangers that could slow down Serbia’s economic growth in the coming period.
“Global problems in the automotive industry, fiscal consolidation announced by the government and recent political tensions in the region may slow economic growth,” the institute’s analysis said.
Ivan Nikolic, the editor of Macroeconomic Analysis and Trends, points out that international financial institutions traditionally approach estimates with caution, and then correct them during the year.
“In our case, they are also skeptical that we will grow more than the region, but that has been happening for several years. The Ministry of Finance says that it will be seven percent, but we will see, there are still two months until the end of the year. If there were no tightening of health measures, it is likely that it will be around seven percent in 2021. It also depends on what the health restrictions in the eurozone will be, but also on how inflation will affect economic growth,” Nikolic notes, Danas reports.
