Serbia: GDP growth accelerates for third consecutive quarter in Q4
According to comprehensive data released on 28 February by the Statistical Institute, year-on-year economic growth in the fourth quarter was confirmed at 2.5%, unchanged from the preliminary estimate released on 31 January. This was up from Q3’s revised growth of 2.2% (previously reported: +2.1% year-on-year) and marked the third consecutive quarter of accelerating economic growth.
The domestic side of the economy experienced broad-based growth in the fourth quarter. Private consumption increased 1.9% compared to the same quarter a year earlier, up slightly from Q3’s revised 1.8% growth (previously reported: +1.7% year-on-year). Government consumption increased 1.1% year-on-year (Q: +1.0% yoy). Fixed investment, meanwhile, grew 12.4% in Q4, up substantially from Q3’s 6.2% and likely on the back of cuts in the National Bank of Serbia’s key policy rate in both September and October.
Year-on-year export growth decelerated in Q4 to 7.5%, down from Q3’s revised 11.6% expansion (previously reported: +11.4% yoy). Import growth, meanwhile, accelerated to 12.0% in Q4, up from a revised 10.8% in Q3 (previously reported: +10.7% yoy). As a result, the external sector’s net contribution to economic growth deteriorated significantly in Q4, from minus 0.9 percentage points in Q3 to minus 4.1 percentage points.
Overall, the economy grew at a moderated pace last year, decelerating to 1.9% growth compared to 2.8% in 2016. Nevertheless, for the first time in several years, the Serbian government posted a fiscal surplus last year, which was largely the outcome of fiscal consolidation and reform efforts. This year, therefore, the government has more fiscal space and will increase spending on wages, pensions and infrastructure investment, which should have an expansionary effect on the economy. Moreover, the economy should benefit from the continuation of accommodative monetary policy. Despite the short-term upsides, high public debt and the continued net migration of young and skilled workers weigh on longer-term economic prospects.