BELGRADE (Serbia), September 16 (SeeNews) – Erste Group expects Serbia's average consumer price index (CPI) to rise by 1.7% in 2020 and by 1.8% in 2021, it said on Wednesday.
"Despite an unprecedented 2Q in terms of mobility of goods and services, there were no significant shortages of supply, thus keeping inflation pressures anchored," Erste Group said in an e-mailed statement.
After bottoming out at 0.6% in April, inflation picked up and stabilised around 2% by mid-year. The initial low inflation was mainly due to the high base effect in vegetable prices, which disappeared in June, and low gas prices, Erste Group said.
After cutting the key policy rate by a total of 100 basis points since the beginning of 2020 and safeguarding FX stability, the Serbian central bank is now focusing on spurring credit growth by supporting corporate lending and ensuring that the fallout from the crisis is contained, Erste Group noted.
"Rate path ahead remains sensitive to external developments, the inflation outlook and stability of the exchange rate. Overall, we see the risks as balanced and expect the NBS to remain on hold in 2020," Erste Group added.
On August 31, Erste Group said it revised upwards its forecast for the economy of Serbia and now expects the country's gross domestic product (GDP) to decline by 1% in 2020, versus a 2.3% drop expected earlier due to the smaller-than-expected drop in the second quarter. In 2021, Serbia's GDP is expected to grow by 5%, Erste Group said back then.
Serbia's average annual consumer price inflation slowed to 1.7% last year from 2.0% in 2018.