SERBIA : Country Wrap-up

The Serbian economy weathered the Covid-19 shock well . It register ed a moderate GDP contraction of - 0.9% YoY in 2020 and bounced 7.4 % last year , with rather positive p rospects for 2022 and 2023 . GDP growth predictions before the war were of a 4.5% growth this year followed by a mild slowdown in 2023 to 4%. Supply chain disruptions and activity slowdown in its three key European economic partners Germany and Italy, but also Russia, will harm growth prospects . Serbian 2022 GDP will likely be 1% to 1.5% lower from the initial 4.5% GDP forecast, reflecting the impact of the Russia-Ukraine war on its economy , risks to this scenario are tilt ed to the downside. Despite a relatively poor vaccination rate ( 47% of the population ) and a persistent ongoing Covid wave from July 2021 onwards , economic activity of t h is Balkan country of 6.9 million people seems decoupled from the Covid-19 epidemic development, which should have help ed the growth pace to remain in place through 2022 , if the war in Ukraine had not happened . Serbia is not spared from the global inflationary pressures . Inflation averaged 4% in 2021, and was to peak at 5 % in 2022, before cooling down to 4.5% next year. The February CPI came out at 8. 8 % YoY, its highest level since July 2013. The Central Bank has res isted to act on the monetary policy front so far , but with inflation likely to rem a in high we expect the National B ank of S erbia to start tightening its rate as soon as in April. Surprisingly, Belgrade loyal ties with Moscow were recently put to the test as Serbia supported the UN resolution against the Russian invasion of Ukraine on March 2 but still refused to align with the EU sanctions .