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BELGRADE (Serbia), November 9 (SeeNews) - The European Commission (EC) said on Thursday it has reduced its forecast for Serbia’s economic growth in 2017 to 2.0% from 3.2% projected in May because of the impact of adverse weather conditions.
Gross domestic product (GDP) growth is expected to accelerate to 3.3% in 2018 as the underlying growth trend remains robust and economic activity is expected to pick up already before the end of this year, the Commission said in its Autumn 2017 Economic Forecast published on its website.
In May, the EC projected that Serbia's GDP will grow by 3.6% in 2018.
Despite robust increases in manufacturing and domestic trade, economic activity in 2017 was impacted by declines in agriculture, which was negatively affected by adverse weather conditions, and construction. On the demand side, growth drivers remained largely unchanged in the first half of the year, the Commission said.
"Private consumption, supported by rising income and employment levels, is seen as a key driver of growth, while exports are projected to remain strong," the Commission noted. "Price pressures are forecast to be contained and balanced or in surplus budgets should drive the government debt ratio further down."
Nevertheless, the economy remains exposed to fluctuations in commodity prices and international capital flow reversals, linked to divergences in monetary policies of major central banks. As economic expansion firms up, maintaining a proper policy mix, in particular preserving a prudent fiscal policy, is a key risk for the envisaged forecast profile.
In addition, the expiration of an International Monetary Fund-led stand-fy arrangement in february 2018 could also test domestic authorities’ willingness and capacity to continue pursuing difficult structural reforms.
EC outlook on the main economic indicators of Serbia (pct change):
|Gross fixed capital formation||3.9||5.1||5.6|