Serbia: Economy rebounds strongly in 2021
The Serbian economy rebounded strongly in 2021, according to preliminary data, as GDP is expected to have increased 7.5% over the previous year. While data for the fourth quarter is set to be released on 28 February, the preliminary estimate for full-year growth suggests that the economy lost some steam in the final quarter of last year but still exceeded pre-pandemic levels.
Domestic demand likely supported the economy in 2021 as investment is estimated to have increased robustly, while solid retail trade turnover growth points to firmer household spending amid robust real wage growth in the year. On the external front, exports and imports of goods and services are also anticipated to have grown at steep rates.
Turning to the new year, the economic recovery should continue, although pandemic-related uncertainty and the possible emergence of new variants such as Omicron pose downside risks to the outlook. Meanwhile, a tightening labor market bodes well for household consumption, although elevated inflationary pressures amid higher energy prices could limit private spending growth.
Analysts at the EIU added:
“Annual growth will moderate in 2022 as base effects and catch-up capacity diminish, but we forecast a still-firm expansion in real GDP of 4.4% (this assumes irregular, but no significant, virus-related disruption), led by rising domestic demand. […] We are slightly more cautious than official forecasters over medium-term growth prospects, given scarring effects from the pandemic and structural weaknesses in Serbia’s economy. We expect robust public investment growth and net inflows of foreign direct investment (FDI), but are less sanguine about domestic private-sector spending and net exports. Limited reform of the (generally weak) business environment and a still-large state sector will hold back innovation and private-sector investment.”