November 3 (SeeNews) - The European Bank for Reconstruction and Development (EBRD) increased on Thursday its projection for Serbia's 2016 economic growth to 2.5% from an earlier forecast of 1.8%.
"Private investments will continue to be the main growth driver, supported by the recovery of consumption, partially offset by declining contribution from net exports," the lender noted in its latest Regional Economic Prospects report.
Serbia's economy is expected to grow by 2.7% in 2017, the EBRD said, lifting its previous 2.3% GDP growth forecast issued in May.
The EBRD, however, warned that the main upside risk for the projection comes from the potential upscaling of production in the recently privatised large steel mill where the Chinese owner announced ambitious investment and production plans while future oil price developments and possible weak external demand, in particular for the automobile sector, may be a drag on growth.
"Medium-term prospects are favourable, but will depend on the pace of reforms envisaged in the IMF programme, further improving the investment climate, supporting NPL resolution and corporate restructuring to unlock credit growth, and accelerating the implementation of major infrastructure projects", the EBRD said.
Serbia's economy turned to 0.8% growth in 2015, from 1.8% contraction a year earlier.
The EBRD predicts economic growth to reach 2.8% in South-Eastern Europe at the end of 2016, before accelerating to 3% next year.