Serbia: Comprehensive estimate confirms growth fell to a one-year low in Q1 2019
May 31, 2019
The economy grew 2.5% in the first quarter of the year, according to a comprehensive estimate released by the Serbian Statistical Institute on 31 May. Although this was down from the 3.4% year-on-year expansion recorded in Q4 2018 and marked a one-year low, the reading exceeded the initial flash estimate of 2.3%. Meanwhile, on a quarter-on-quarter seasonally-adjusted basis, GDP expanded 0.3% in Q1, which was up from the 0.2% quarter-on-quarter expansion posted in the previous quarter.
Weaker external sector dynamics largely explained the year-on-year deceleration, as strong export growth (Q1: +9.3% year-on-year; Q3: +10.6% yoy) was once again outpaced by growth of imports (Q1: +9.4% yoy; Q4: +10.9% yoy). Domestically, government consumption growth also slowed, from 3.3% in Q4 to 2.5% in Q1. On the other hand, other components of domestic demand held up reasonably well. Private consumption growth was stable at Q4’s 3.2%, buttressed by a tight labor market, rising wages and strong retail sales throughout the quarter. Moreover, fixed investment accelerated notably (Q1: +8.4% yoy; Q4: +3.2% yoy), despite most of the industrial sector contracting (with the construction sector a noticeable exception).
Looking ahead, the economy is expected to soften this year. A weak industrial sector and mounting external headwinds—namely an expected slowdown in the Eurozone, Kosovo import tariffs, rising global trade protectionism and regional tensions—will likely dampen growth. On the other hand, ongoing efforts to pursue IMF-backed reforms should help strengthen investor confidence and attract foreign investment.
Author: Lindsey Ice, Economist