September 27 (SeeNews) - The World Bank has increased its forecast for Serbia's economic growth in 2016 to a real 2.5%, to be driven by investment and private consumption, the bank said on Tuesday.
Earlier this year, the World Bank forecast that Serbia's economy will expand by 1.8% in 2016, accelerating from last year's growth of 0.7%.
Serbia's GDP growth will continue to pick up speed to reach 2.8% in 2017 and 3.5% in 2018, the World Bank said in a country forecast published in its autumn economic report on six countries of South East Europe. The report covers Albania, Bosnia, Kosovo, Macedonia, Montenegro, and Serbia.
Serbia is the biggest driver of overall economic growth in the SEE6 region, having this year recovered to the pre-crisis GDP level, after negative or minimal growth in 2014 and 2015, a consequence of the floods, the bank noted.
Consumer price inflation in Serbia is expected to contract slightly to 2.0% in 2016, from 2.1% last year, before growing to 3.5% in 2017, where it will remain the following year.
Public expenditure in Serbia, which stood at 44.8% of the GDP in 2015, will fall to 43.7% in 2016, and drop further to 42.6% and 42.0% in 2017 and 2018, respectively.
Public debt, however, will grow to 71.4% of the GDP this year, from 69.9% last year, before dropping to 70.9% next year and rebounding again to a high 72.7% in 2018.
Serbia is the only country in the SEE6 where the current account deficit is forecast to narrow this year, reaching 4.2% from 4.8% last year. For 2017 and 2018, Serbia's current account deficit is projected at 3.9% and 3.8%, respectively.
"In Serbia, healthy manufacturing exports and an improved balance of trade in services drove the CAD to narrow, against the regional trend," the World Bank said.
According to the World Bank, growth in the SEE6 region will strengthen from 2.2% in 2015 to 2.7% in 2016, driven by robust investment and recovering household consumption.
After several years of moderation, consumption is also expected to accelerate, mainly fueled by improvements in labuor markets (Albania, Kosovo, and Serbia) and higher public wages and transfers (Macedonia and Montenegro), the World Bank said.
In terms of the fiscal deficit, fiscal consolidation has started to bear fruit and is on track to reduce the region’s average fiscal deficit from 3.6% of GDP in 2015 to 3.4% in 2016. Albania, Bosnia, and Serbia continue their fiscal consolidation efforts and are expected to record low or declining fiscal deficits this year and declining public and publicly guaranteed (PPG) debt for the first time since 2009, the bank said.