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BELGRADE (Serbia), March 11 (SeeNews) - Erste expects Serbia's gross domestic product (GDP) growth will slow to 3.3% in 2019 from an estimated 4.3% last year, due to the weakening of external demand, the Austrian-based banking group said on Monday.
Serbia's domestic demand is underpinned by rising wages, positive labour market developments, strong remittances and revoked cut of above-average pensions, but the downside lies in the expected double-digit import growth and slowing exports, Erste Group said in a macro outlook report.
The investment cycle remains strong on stable foreign direct investment inflows and public sector infrastructure investments, Erste said.
"Risks seem evenly balanced and are related to the extent of external slowdown, realisation of investments and the output of the agricultural sector."
Serbia's inflation is expected to average 2.1% in 2019, as aggregate demand remains the key inflation factor, while the central bank is forecast to keep its key rate unchanged at 3% throughout the year, supported by a stable FX pattern and the slowing of ECB's planned hiking tempo, Erste said.
"As for rallies, we do not expect that the opposition could use the opportunity and establish a unified front. On the other hand, the ruling coalition is equally comfortable to call for early elections this year or to wait for regular elections next year. In the current situation, we give a slight advantage to the latter, but acknowledge it is a close call," the bank noted.
Last month, Serbia's central bank said it expects the country's economy will grow by 3.5% in 2019, driven by domestic demand.