SOFIA (Bulgaria), March 24 (SeeNews) – Romania is expected to see robust growth in transport and communications, whereas in Serbia and Croatia economic growth is expected to be driven by manufacturing, a senior economic advisor to global financial consultancy Ernst&Young (EY) said.
“Given the weakness of domestic demand in both Serbia and Croatia, and the weakness of European currencies on global markets, it seems likely to us that growth will come predominantly in export-facing sectors in 2015, and particularly in manufacturing,” Tom Rogers, senior advisor to the EY Eurozone Forecast, told SeeNews in an emailed interview on Monday.
Romania, for its part, is expected to see strong growth in the transport and distribution sectors in 2015, as well as in information and communications. Growth in the country will be more evenly spread across the service and industrial sectors.
Romania's gross domestic product (GDP) is expected to grow more rapidly than that of Serbia and Croatia, at just above 3% in 2015-2017, Rogers said, adding that Croatia and Serbia are gradually emerging from a long and difficult recession. Moreover, the Serbian economy will continue to contract in 2015, largely as a result of the need for further spending cuts to get the government’s budget into balance.
“In Croatia, we expect modest economic growth in 2015, the first since 2008, picking up pace a little as consumer and business confidence start to strengthen,” Rogers said. “But at 2% [a year] in 2016 and 2017, growth will remain weak by historical standards in light of a legacy of higher consumer debt and a need to balance the government budget,” he added.
Rogers also said that all three economies stand to benefit from further integration into the European economy, but nevertheless have much to do to improve their business environments and maximise potential gains.
Serbia is expected to post the highest inflation of the three countries in the near future.
“Serbia’s history of stubbornly high inflation means that wage and price expectations generally mean faster price growth than elsewhere – we expect inflation of more than 4% per annum over the coming few years, in spite of the high unemployment rate," Rogers commented.
In his view, inflation in Croatia and Romania will be closer to levels seen elsewhere around the EU, at 2-3%.
He cited low public debt levels in Romania as a positive trend, adding that Serbia has a little more fiscal headroom. Croatia, however, faces a relatively high public debt, which remains a pressing concern, Rogers noted. This leaves the country vulnerable to changes in global borrowing costs.
Rogers also said Romania’s budget deficit is smaller than its economic growth and the country's public debt burden is expected to ease over the coming years.
"[...] in Croatia and Serbia more probably needs to be done to achieve a faster consolidation than currently expected, in order to further reduce debt and lower vulnerability to future financial crises,” he commented.