Serbia to rank 5th in Europe in terms of economic growth

In 2017, Serbia ranked 28th in Europe in terms of the economic growth rate, while this year it will probably rank 5th or 6th – says  Milojko Arsic, editor of the Quarterly Monitor.

Based on the last year’s semi-annual growth, in the CEE region, Serbia, with is 4.9% growth, is right behind Poland. However, when we exclude short-term, temporary factors affecting agriculture, construction and power industry, which impact is around 1.5 percentage points, then the economic growth for this year stands at 3.3 percent, which is below the CEE average. Arsic predicts that, at the end of the year, the growth of gross domestic product will amount to 4.3 percent, and next year, between 3.5 and 4 percent if there are no unpleasant surprises. In 2002, Serbia had the fastest economic growth in Europe, and in 2007, the second largest.

“The business cycle in Serbia lags behind those in the CEE countries that were in expansion in 2014 and 2015. In Serbia, this expansion happened only this year. In the second half of the year, we expect a slowdown in growth, given the larger year-end base and the smaller impacts of temporary factors. In this way, we can achieve high growth rates for the next year or two, or even longer. We need decades of high growth to catch up to Europe, and this cannot be done without the help of the relevant institutions, the rule of law, through reduction of corruption etc. That’s why the authorities should not be that delighted with these results,” Arsic said, reminding that the problem has not yet been resolved by the countries in the region with Bosnia and Herzegovina, Albania and Macedonia still sitting at the bottom of the lists.

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The highest contribution to the high economic growth in the first half of the year comes from construction companies with a growth of 25 percent. However, Arsic questions the validity of this information and adds that it is more likely that last year’s decline was exaggerated, and that this year’s growth is shown higher than it actually is. Also, agriculture had a major impact with a growth of 14.8 percent, as did the electricity production with 6.5 percent. What could be worrying is the slowdown in the growth of the manufacturing industry. On the demand side, investments were the major contributors to the economic growth with a 13.5% increase. The GDP growth, in the first half of the year, was further fuelled by the growth of private demand of 3.1% and government spending of 3.9%. On the other hand, net exports decreased by as much as 17% compared to the same period last year. Arsic warns that domestic demand in Serbia is very high and makes up about 70 percent of the GDP and that this is also indicated by the growth in the foreign trade deficit.

The situation in the external trade is deteriorating with the deficit in the second quarter standing at 8.7 percent of the GDP. On the other hand, the deficit in the current account of the balance of payments is decreasing due to the large revenues in the second quarter, as well as the smaller expenditure relating to the dividends.

On the other hand, the capital influx to Serbia was high in the second quarter. EUR 803 million entered the country in the second quarter. Arsic also points out that the economy and banks borrowing from abroad is a good signal that tells us that companies are planning to invest in the upcoming period. However, one indicator does not in any way benefit Serbia and that is a negative international investment position. Total liabilities of Serbia abroad amounted to EUR 58.2 billion and the receivables to EUR 22.1 billion.

When it comes to public finances, the situation is good, as a surplus of 50.6 billion dinars was recorded from January to July, which makes up 2% of the GDP. Arsic points out that the increase in the surplus in the second quarter was boosted by the disbursement of dividends from public companies in the amount of 19 billion dinars.

“It is a pity that the state takes money from public companies that otherwise could be invested and that this money is just kept in bank accounts, Taking dividends from public companies may have made sense in 2015 and 2016, but now it’s no longer justified,” Arsic said, pointing to the anomalies in VAT and income tax revenues. Namely, and despite the fact that last year’s profit of businesses in Serbia was twice as high as in the previous year, the collected income tax was lower than last year. Also, VAT revenues almost stagnated, although we had a growth in domestic consumption, as well as a high import growth.

(Danas, 21.09.2018)

https://www.danas.rs/ekonomija/srbija-sa-28-na-5-mesto-u-evropi/

 

 

 

This post is also available in: Italiano

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