June 12 (SeeNews) - Erste Group said on Tuesday it has increased its forecast for Serbia’s economic growth in 2018 to 3.5%, from 2.9% predicted earlier on the back of acceleration of economic activity in the first quarter.
"At the beginning of 2018, we could see a notable acceleration of economic activity, as the 1Q18 GDP growth figure landed at a strong 4.6% y/y, above all expectations," Erste said in its latest macroeconomic outlook on Serbia.
Growth was mostly supported by stable private consumption performance and a strong rebound of investments. Inflation was moving below the target interval in recent months, mostly as a result of the high base effect, while labour market indicators continued to improve.
"As for economic policy, fiscal policy took on a more expansionary tone, while monetary policy also stayed on a downward path," Erste said.
Serbia's fiscal policy is expected to stay expansionary, as budget execution in 2017 and the first half of 2018 leaves enough fiscal space, while the key rate will remain unchanged in the rest of 2018, supported by a gradual acceleration of the inflation trajectory in the coming months.
Strong GDP numbers, acceleration of lending activity and expected ECB tapering also play an important role for the monetary policy outlook, Erste noted.
Last month, the European Commission said it maintained its forecast for Serbia’s economic growth in 2018 at 3.3%, backed by domestic demand and investment activity.