Serbia: GDP growth records best reading since Q2 2022 in Q4
GDP growth accelerated to 3.8% year on year in Q4 2023 from 3.6% in the third quarter. The reading matched the flash estimate and marked the fastest growth since Q2 2022. On a seasonally adjusted quarter-on-quarter basis, economic growth waned to 0.9% in Q4 from the previous quarter’s 1.4% expansion. Q4’s reading marked the softest growth since Q1. In 2023 as a whole, the economy grew 2.5%, marginally below the 10-year average of 2.7% but matching the pace of the previous year’s expansion.
The upturn came on the back of a broad-based improvement, as private consumption, public spending, fixed investment and exports all expanded at faster rates. Private consumption increased 2.5% in the fourth quarter (Q3: +1.3%); spending was likely boosted by lower inflation. Government consumption improved to a 5.9% expansion in Q4, which was above the third quarter’s 1.7% expansion. Fixed investment growth rose to 5.2% in Q4 from 4.1% in the prior quarter. On the external front, exports of goods and services rebounded, growing 0.3% in Q4 (Q3: -1.5% yoy). Imports of goods and services also rebounded, growing 4.2% in Q4 (Q3: -1.2% yoy), marking the highest reading since Q4 2022 and undermining the positive contribution of net trade to GDP.
Early data for Q1 indicates that activity was robust at the outset of 2024, and our panelists expect the economy to post another strong expansion in the quarter. Looking at 2024 as a whole, the Consensus is for the Serbian economy to grow at a faster pace than last year. A lower unemployment rate and declining inflation will boost private consumption. Additionally, fixed investment and public spending will gain steam, while recovering trade across the globe will buttress exports. Nonetheless, risks are skewed to the downside, stemming from an escalation of tensions with neighboring Kosovo and potential EU sanctions.
Analysts at the EIU commented on the short-term outlook:
“We expect that retail trade will jump on a year-on-year basis in the first half of the year and will be a strong driver of economic growth overall. This view is supported by the latest consumer and retail trade confidence indicators produced by Eurostat, which are recovering after being hit early last year. Industrial confidence also appears to be strengthening again.”