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Nov 16, 2017 15:28 EEST
November 16 (SeeNews) - The World Bank said on Thursday it has lowered its projection for Serbia's economic growth in 2017 to 2.0% from 2.3% foreseen in its October 2017 Europe and Central Asia Economic Update Report and 3.0% forecast in its Spring 2017 Western Balkans Regular Economic Report.
Serbia's GDP is expected to grow by 3.0% in 2018 and 3.5% in 2019, the World Bank said in its Fall 2017 Western Balkans Regular Economic Report.
Severe and protracted winter weather weighed heavily on energy and construction, and a recent drought caused the agricultural output to plunge to an estimated 10% less than in 2016, the World Bank said.
"Private and even more public investment fell, contributing only one-third as much to growth in 2017 as in 2016. Moreover, as rigid demand for intermediate goods and energy resulted in growth of imports, they overwhelmed output growth."
Growth is projected to gradually recover in 2018 and beyond, but not without risk. After this year’s disappointing growth, the Serbian economy is expected to recover over the medium term. Based on announced increases in public wages and expected increases in employment generally, consumption is likely to grow faster than previously projected, but it is not clear how much of this will spill over to imports. Public investment should rise in 2018 with better project execution, the World Bank said.
"Serbia needs to deal with its large and unsustainable state-owned enterprises (SOEs), te bank noted. Given the potential fiscal impact and sector-specific rationale for government ownership, priority for attention should be several large chemical SOEs," the bank noted.
According to the World bank, the main risks to the baseline scenario stem from a possible fiscal loosening and a widening of external imbalances. With the current International Monetary Fund (IMF) programme set to expire early next year, recent increases in wages, substantial subsidies to SOEs, and delays in reforming the public wage system are exerting more pressure on fiscal stability, the World Bank said.
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