Serbia’s economic growth will be slower this year due to several economic crises, including the one caused by the war in Ukraine.
Serbia’s GDP growth is projected to drop to 3.2% in 2022, although previous forecasts indicated that the growth rate would be 4.4%, the Regular Economic Report for the Western Balkans, presented at the World Bank conference, claims.
Serbia has largely recovered from the Covid-19 pandemic, achieving real GDP growth of 7.4% in 2021, fueled by strong private consumption and investment. However, the aftermath of the war in Ukraine is negatively impacting exports from Serbia, as well as foreign direct investments, remittances, and tourism revenue.
The report states that Serbia will maintain macroeconomic stability despite the highlighted downside risks that could happen in 2022. Inflation is already growing and is expected to go up further, as well as in other Eastern European countries, due to rising global food and energy prices.
The budget deficit could be higher than expected due to the slower economic growth and there could be a need to increase government spending in the form of subsidies and guarantees to support companies that are hit the most by the Ukrainian crisis – those from the electricity and gas sectors.
“The Serbian economy is expected to achieve stable growth of around 3 percent a year in the medium term, which is similar to the pre-pandemic growth rate,” said Nicola Pontara, director of the World Bank’s office in Serbia.
“These prospects depend mainly on external factors, such as the war in Ukraine and the global energy crisis, but also on the speed with which Serbia will implement internal reforms aimed at financial consolidation of its public companies,” Pontara said, adding that the World Bank will remain committed to supporting Serbia. “In collaboration with the Serbian government, we have just created a new partnership framework that will be approved next month in Washington and will cover the period from 2022 to 2026. We have $1 billion to invest and the goal is to support green growth and inclusive services,” Pontara explained.
Similar to Serbia, growth projections have been adjusted for all Western Balkan countries. According to new analysis, the growth rate in this region in 2022 will be 3.1 percent.
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