Interest rates could start dropping mid-year

This year, we expect a continued recovery of the Serbian economy and GDP growth could range between 3 to 3.5 percent, said Milojko Arsić, professor at the Faculty of Economics in Belgrade, at the presentation of this year’s first Quarterly Monitor (QM).

The authors of QM expect that the drop in interest rates could start in the middle of the year, when it is estimated that the National Bank of Serbia could also start lowering its benchmark interest rate.

Inflation, according to QM’s estimate, could range between 4.5 and 5 percent this year, said Professor Arsić and pointed out that inflation is falling in all European countries too, so in February, it stood at 2 percent in the Eurozone, in Central and Eastern Europe 3.9 percent and in Serbia 5.6 percent.

“Serbia had the second highest year-on-year inflation in Europe in February, after Romania. In the coming months, we expect a further slowdown of inflation in our country and its return to the target limits, with the average inflation at the end of the year at between 4 and 4.5 percent,” said Professor Arsić.

When it comes to economic growth, the authors of QM expect that the growth of civil servant salaries and pensions as well as public investments will result in an increase in GDP by up to 3.5 percent.

“However, this is below the potential, as the natural growth rate of the Serbian economy is 4% of GDP. Also, there is a risk that public investments along with the fast growth of current expenditures will increase the fiscal deficit, but this can be avoided by postponing some of the planned projects”, Professor Arsić noted.

QM’s analysis also indicates that in 2024, we should expect further growth in employment with somewhat stronger growth in average salary. On the other hand, it is also expected that the National Bank of Serbia will begin loosening the “monetary belt” and reduce the benchmark interest rate from the middle of the year.

“In the coming months, stagnation or a slight decline in nominal interest rates is expected, but also an additional increase in real rates (the difference between the nominal interest rate and the inflation rate). Nominal and real interest rates could begin to decline during the second half of the year. However, we estimate that interest rates will remain relatively high in the next year or two,” warned Milojko Arsić.

(Biznis.rs, 20.03.2024)

https://biznis.rs/vesti/srbija/opadanje-kamata-moglo-bi-da-pocne-polovinom-godine-privredni-rast-do-35-odsto/

This post is also available in: Italiano

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