The European Commission (EC) said on Thursday that it has lifted its forecast for Serbia’s economic growth in 2018 to 4.1% from 3.3% projected earlier, backed by robust investment and domestic consumption.
Gross domestic product (GDP) is expected to slow to 3.8% in 2019 and 2020, while the unemployment rate is projected to decline to 12% next year from 13.1% in 2018, the Commission said in its Autumn 2018 Economic Forecast published on its website.
Investment is expected to be robust and domestic consumption to receive a further boost from rising employment and income, the EU Commission said. “Financing conditions and fiscal policy are predicted to be supportive of growth. However, strong domestic demand and worsening terms of trade are set to push up inflation and external imbalances.”
The economy is expected to stimulate further employment gains and, according to the Commission, the unemployment rate is forecast to fall to its lowest level in decades, pushing inflation up slightly, closer to the midpoint of 3% of the target band of the central bank.
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The good fiscal performance is expected to be further supported by the implementation of long-standing reforms of tax and public administration, and by completing the restructuring and privatization of major state-owned enterprises, the EC added.
The European Commission states that Serbia has recorded growth in Serbia in almost all sectors. In construction, the growth exceeded 20 per cent, while a good agricultural season has led to the sector achieving the double-digit growth.
The report also says that short-term indicators send mixed signals in the third quarter. On one hand, domestic demand has continued to grow, while industrial production fell by 4.3 per cent in August compared to last year.
The Commission adds that, after a long period of time, consumers have regained confidence that together with improved labour market conditions and higher wages should increase household spending, and that, with sustainable fiscal performance, public spending should provide sustained growth support.
The report said that with the current balanced fiscal policy, Serbia’s public debt could be close to 50 per cent of GDP by the end of 2020.
(Nova Ekonomija, 08.11.2018)
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