Experts forecast Serbia’s GDP at 3% and inflation at 15% by year-end

According to the new analysis of the Quarterly Monitor, Serbia’s GDP may only grow by 3% this year, unless the situation in the world worsens.

If there is no big jump in energy prices in the coming months, and if central banks continue to raise interest rates and countries conduct a relatively moderate policy, then the inflation could grow to the maximum of 15% by late 2022 and early 2023.

“In the case of Serbia, the inflation would be 15 per cent year-on-year in December,” says Milojko Arsić, a professor at the Faculty of Economics and editor-in-chief of the Quarterly Monitor. “If there is a gas shortage in Europe, which will lead to higher prices for all energy products, inflation could be higher and last longer,” he adds.

Commenting on what we can expect this winter, especially with regard to the price of energy and consequently the price of heating in Serbia, he says: “It is likely that there will be no additional, substantial increase in prices for end consumers, but if prices on the world market jump, someone will have to pay for it. And that means that the state will have to take out additional loans, which is not that easy now, to temporarily fill the gap, and in the end, taxpayers will bear the cost.”

Arsić adds that seasonally adjusted industrial production has been falling since April, investment growth has slowed considerably, and private consumption is also slowing down.

“In the second half of the year, a significant economic slowdown is expected due to the decline in the real value of income, great uncertainty, the tightening of monetary policy, as well as the deterioration of the situation in Europe. GDP growth is expected to be around two per cent, and three per cent at the year-end. In the event of a significant increase in energy prices and energy shortage, the results will be even weaker,’ Arsić said.

According to him, foreign direct investments decreased by 10 per cent, which is still a good result given the current conditions, and the state managed to generate a fiscal surplus of 19 billion dinars in the first seven months.

“The money that was given to public companies in the amount of more than 100 billion was treated as a loan and not as expenditure. Since most of the ‘borrowed’ funds will not be returned, this will increase expenditure and the deficit. Instead, real income has grown significantly, while expenditure, excluding borrowing, recorded only modest growth,” he concluded.

(Biznis i Finansije, 30.09.2022)

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