September 20 (SeeNews) - Erste Group said it has lowered its forecast for Serbia’s economic expansion in 2017 to 2.1%, from 2.5% projected in June, due to 'disappointing' figures in the first half of the year.
The forecast for Serbia’s economic growth in 2018 remains unchanged at 3.0%, while a 3.2% rise is expected in 2019, Erste Group analysts said in their latest macroeconomic outlook report on Serbia published on the bank's website earlier this week.
"The GDP performance in the first two quarters came in below all expectations, with the figures standing at 1% y/y and 1.3% y/y, respectively," the analysts said. "The detailed structure reveals that such disappointing developments were mostly a result of weather-related one-offs, which disrupted agricultural and energy production."
Looking at the expenditure side, the headline figure was mostly dragged down by weaker investments and the weaker contribution of net exports which was negative in the first quarter, while consumption kept its stable performance of around 2% on the year, the analysts said.
"Looking forward, we see the growth figure picking up, with strengthening domestic demand playing the key role, while net exports should play a more neutral role," they added.
The consumption profile should be supported by improvements on the labour market, an increase in wages in the private and public sectors and continued support from consumer loans. Investments should be supported by a gradual recovery of corporate loans, somewhat better business climate and the announced public investment cycle, Erste said.
" Finally, the stable economic outlook for main trade partners will be supportive for the export side, but strengthening domestic demand and stabilizing oil prices suggest more upside pressures on the import side, so we envisage a mildly negative contribution from net exports," the analysts explained.
In June, Erste lowered its forecast for Serbia’s economic expansion in 2017 to 2.5%, from 3.1% projected in March, due to weaker-than-initially-expected gross domestic product (GDP) growth in the first quarter.