BELGRADE (Serbia), October 7 (SeeNews) – The World Bank expects Serbia's economy to shrink by 3.0% this year as a result of the coronavirus crisis, before growing by 2.9% in 2021, it said on Wednesday.
"The COVID-19 pandemic and the related containment measures are taking a heavy toll on the Serbian economy. It is expected to enter recession in 2020 with a projected decrease in real GDP of 3%. Recovery will start in 2021, but at a modest pace," the World Bank said in its Europe and Central Asia Economic Update Fall 2020.
In its Global Economic Prospects June 2020 report, the World Bank predicted Serbia's economy will contract by 2.5% in 2020, before growing by 4.0% next year.
Serbia used most of the available fiscal space early on, when the pandemic started, the World Bank said.
"With the economy in recession, and public debt on a sharp rise, the space for future stimulus packages is limited. Therefore, further reforms are needed to bring the economy back to sustained growth and to secure jobs and incomes while strengthening resilience to shocks."
Investment will only slowly return to previous levels, and consumption will be subdued as the real impact on labour markets will be felt only later in the year or in early 2021.
Over the medium term (2021-2023) growth is expected to return to its previous trajectory, although the outlook crucially depends on international developments, the pace of structural reforms and political developments.
Most importantly, Serbia needs to work further on removing bottlenecks to private sector growth, the World Bank said.
The Western Balkans region comprising Albania, Bosnia and Herzegovina, Kosovo, North Macedonia, Montenegro, and Serbia, will face an economic decline of 4.8% in 2020, the World Bank said. Growth in the region is projected at 3.5% in 2021.