Serbian town in the winter

Serbia GDP Q4 2021

Serbia: Economy grows at softer pace in the fourth quarter

GDP growth lost momentum, falling to 7.0% year-on-year in the fourth quarter, from 7.6% in the third quarter and marking the weakest reading since Q2.

The moderation was broad-based, with private consumption, public spending, fixed investment and exports all weakening. Household spending growth fell to 7.3% in Q4 (Q3: +8.1% yoy) despite a drop in the unemployment rate (Q4: 10.2%; Q3: 10.8%). Skyrocketing inflation ate into consumers’ pockets and dragged on spending. Government consumption growth softened to 5.8% in Q4 (Q3: +7.8% yoy). Meanwhile, fixed investment growth fell to 9.8% in the period, marking the softest reading since Q1 2021 (Q3: +12.2% yoy).

Exports of goods and services increased 14.0% on an annual basis in the final quarter, which was below the third quarter’s 22.4% expansion. In addition, imports of goods and services growth moderated to 15.5% in Q4 (Q3: +22.8% yoy). As such, the external sector detracted 2.8 percentage points from the overall reading, matching the previous quarter’s subtraction.

On a seasonally-adjusted quarter-on-quarter basis, economic growth was unchanged at 1.7% in Q4, matching the print record in the previous two quarters. This suggests that underlying conditions remained robust.

However, the outlook—particularly in the near term—has turned gloomier recently, with Russia’s invasion of Ukraine and geopolitical tensions escalating dramatically. The military conflict has sent energy commodities’ prices skyrocketing. This will feed through to greater consumer price pressures as oil and natural gas become more expensive, eating into consumers’ pockets and denting household spending further. Private consumption, a key engine of growth, will therefore be restrained. Moreover, pricier commodities will dent business confidence and weigh on fixed investment as well as industrial output. That said, economic growth in the year as a whole should remain robust on the back of a tightening labor market, supporting household spending somewhat, while a generally more upbeat demand outlook should keep fixed investment growth sturdy. Furthermore, the rollback of global Covid-19 restrictions should support tourism.

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