Erste sees Serbia's economic growth quickening in 2016-2018

Erste sees Serbia's economic growth quickening in 2016-2018 Ministry of Economy/All rights reserved.

BELGRADE (Serbia), December 23 (SeeNews) - Serbia's real economic growth is expected to accelerate to 2.6% in 2016, 2.9% in 2017 and 3.2% in 2018, Erste Group analysts said.

"The economic agenda in 2017 will be strongly determined by the political agenda, with potential snap elections (which could be held along with the presidential election) threatening to delay some important structural reforms announced for 2017," Erste Bank analysts said in their CEE Insights report published earlier this week.

In a previous study on the macroeconomic outlook on Serbia, published on December 15, Erste Group analysts issued a forecast for a real 2.7% increase of Gross Domestic Product (GDP) in 2016. Economic growth in 2017 and 2018 was forecast at 3.0% and 3.3%, respectively, supported by increasing domestic demand. 

The analysts see inflation moving in 2017 towards the middle of the 1.5%-4.5% target band set by Serbia's central bank NBS in the following months, supported by stabilising oil prices and stronger demand-side pressures. Inflation in 2016 is seen at 1.1%, whereas for 2017 and 2018 it is forecast at 2.4% and 3.1%, respectively, identical to the projections issued in the macroeconomic outlook report.

Erste Bank considers that a Serbian government bond issue in euro as possible in 2017, because a potential rate hike by the US Federal Reserve could put pressure on Serbian public debt trajectory. However, better fiscal performance, which leaves room for some stronger interest rate pressures, and reliance on bilateral loans still keep the Eurobond only a theoretical option.

The analysts see the restructuring of state-owned enterprises, with a focus on oil and gas company Srbijagas, and the continuation of the privatisation story for Telekom Serbia, as the main topics in 2017. 

In November, NBS, said it expects the country's GDP to grow by 2.7% in 2016 due to the upbeat performance of the agriculture sector which expanded above expectations. 

In 2015, the country's GDP expanded by a mere 0.8% after contracting by 1.8% in 2014, due to the devastating floods that hit the country, causing damages and economic losses estimated at some 1.5 billion euro ($1.6 billion).

($ = 0.957328 euro)

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