EUR 11.40 For Business Accounts Only

Serbian Macro Overview 1H2017

According to a flash estimate released on May 4^th by the Statistical Office, GDP grew 1.0% in 1Q over the same quarter last year. The figure marked a significant deceleration from the 2.5% increase recorded in 4Q 2016. Serbia's central bank, NBS, expects the country's economy to grow by 3.0% in 2017 on the back of labor market recovery. Economic growth is expected to accelerate to 3.5% in 2018, as structural reforms implemented by the government and improvement in business climate are encouraging economic development. According to the World Bank, GDP will grow by 3% in the current year and 3.5% in both 2018 and 2019, as was also projected in the World Bank’s winter report. The same projection was reported by IMF, since it has confirmed the 3% GDP growth forecast for this year, while next year's growth is estimated at 3.5%.

Serbia's budget balance showed a surplus of RSD 10.7bn in the first four months of 2017, compared to a deficit of RSD 13.1bn in the respective period of last year. Total budget revenues grew by a real 6.9% on the year, reaching RSD 347bn in the period under review, while expenditure increased 2.6% to RSD 336.3bn. The Government of Serbia adopted Budget Law for 2017, which envisions a budget revenue of RSD 1,092.9bn and expenditures of RSD 1,162bn. The planned fiscal deficit is RSD 69.1bn. Despite the project loans’ being included in the budget expenditures, on top of the expenditures of the Corridors of Serbia in the total amount of RSD 43.5bn, the deficit planned for 2017 will be RSD 52bn lower than the 2016 deficit. Public debt at the end of March stands at EUR 24.55bn, which is 69.2% of the country’s GDP. As for remembrance, public debt at the end of 2016 was at EUR 24.82bn or 72.9% of GDP.

According to data from the Serbian Statistical Office, consumer prices fell by 0.5% in May, mostly on account of reduced prices of fresh vegetables and energy products. Annual inflation fell to 3.5% in May. Since early 2017, it has been moving within the target tolerance band of 3±1.5%. Core inflation (consumer price index excluding food, energy, alcohol and cigarettes) equaled 2.2% y-o-y in May. Such movements in core inflation are indicative of the temporary character of inflationary pressures.

The fall in global oil prices and the recovery in external demand positively affected the foreign trade, which is characterized by an increase in the volume of trade and the reduction in the trade deficit. Also, a higher inflow of remittances and the positive effects of fiscal consolidation influenced the improvement of the balance of payments position of the country.

Labor Force Survey, completed by SORS, showed unemployment rate in Serbia at 14.6%. Compared with the first quarter of the previous year, unemployment was significantly decreased: number of unemployed persons decreased by 149,300, thus decreasing the unemployment rate by 4.4 percentage points. Formal employment increased by 99,400, primarily in the activity of Manufacturing and Accommodation and food service activities, which is in accordance with the data on registered employment that the Statistical Office of the Republic of Serbia also monitors and publishes.