Serbian town in the winter

Serbia GDP Q4 2019

Serbia: Economic growth surges to over 11-year high in Q4 2019

The economy grew 6.2% over the same quarter a year prior in the final quarter of 2019, marking the strongest outturn since September 2008. The reading was well above Q3’s 4.8% expansion and brought full-year 2019 GDP growth to 4.2% (2018: +4.4%). In quarter-on-quarter seasonally-adjusted terms, however, GDP growth moderated to 1.7% in Q4 from 2.2% in Q3.

A sharp acceleration in fixed investment growth, which skyrocketed to 29.6% year-on-year from 17.5% in the prior quarter, propelled the expansion. This was in tandem with robust activity in the construction sector amid ongoing infrastructure and residential projects. Meanwhile, private consumption growth inched higher (Q4: +3.1% year-on-year; Q3: +3.0% yoy) amid falling unemployment and higher wages. Conversely, government consumption growth almost halved (Q4: +2.5% yoy; Q4: +4.7% yoy).

Turning to the external sector, growth in exports of goods and services moderated to 8.7% year-on-year in Q4 from 9.0% in the prior quarter. On the other hand, growth in imports of goods and services picked up (Q4: +11.4% yoy; Q3: +9.6% yoy) likely linked to capital imports related to investment spending. Overall, the external sector subtracted 2.8 percentage points from headline GDP growth in Q4 (Q3: -1.1 percentage points).

This year, the outlook remains favorable on an expected rebound in the industrial sector and strong household spending. Moreover, government spending will likely ramp up ahead of parliamentary elections in April, while FDI inflows should rise robustly, with IMF-back reforms likely continuing to support investment and business confidence. Nevertheless, the external sector is likely to endure strong headwinds from weaker growth in its European counterparts, a sluggish German auto sector, and ongoing trade tensions with neighboring Kosovo.

Mauro Giorgio Marrano, senior CEE economist at UniCredit noted:

“Looking ahead, we expect GDP growth to moderate in 2020, mainly due to our assumption of a global economic slowdown in 2020, which we expect to affect exports and private investment […] The strong end of 2019 in terms of growth implies a significant carryover for 2020, of around 2pp, which, however, could in part be offset by the impact of coronavirus, although it is too early to assess the extent of this.”

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