Modest Recovery Ahead
BMI View: The Serbian economy posted a real GDP growth of 2.1% y-o-y in Q113, confirming our expectation that the economy is poised for a modest recovery this year. We continue to forecast full-year growth of 1.2%, which will increase to 3.4% in 2014, driven mainly by a pickup in fixed investment and private consumption, which will offset the negative contribution to growth from government consumption.
The Serbian economy suffered severe setbacks in 2012, as a result of drought, which halved agricultural production and hit exports, while leading to a double digit inflation and eroded consumers' purchasing power. As these effects are already receding in Q113, we believe that the economy is poised for a modest rebound. Serbia's structural deficit means net exports will continue making a negative contribution to GDP, similar to public consumption, which will remain limited by the government's fiscal consolidation drive. On the other hand, we see a positive contribution from fixed investment on the back of an expanding manufacturing base, in addition to support from private consumption on the back of improving purchasing power. As a result, we forecast full-year growth of 1.3% in 2013 and 3.4% in 2014 in real terms.
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|Poised For A Rebound|
|Serbia - GDP, Constant 2005 prices RSDmn, % chg, y-o-y|