Serbia: Second estimate confirms economic growth cooled in the third quarter
According to a comprehensive estimate released by the Statistical Institute on 30 November, economic growth moderated in the third quarter following two robust GDP prints in the first half of the year. Despite the softer result, the economy still posted a solid revised 3.8% year-on-year expansion in Q3, which beats the flash estimate of 3.7%. The print was, however, down from the revised 4.9% expansion logged in Q2 (previously reported: +4.8% year-on-year). On a quarter-on-quarter seasonally-adjusted basis, the economy grew 0.5% in Q3 (Q2: +1.0% quarter-on-quarter), reflecting softer growth on both the domestic and external front.
Easing growth in the domestic economy came amid a broad-based weakening. Although private consumption matched the second quarter’s 3.3% annual expansion, fixed investment growth eased to 7.0% in Q3, down from 12.3% in Q2 and despite significant infrastructure investment and favorable financial conditions. Meanwhile, government spending moderated (Q3: +4.0% yoy; Q2: +4.8% yoy). However, this was still the second fastest rate since Q2 2012 thanks to loosening of previous fiscal consolidation measures and raising of pension payouts.
In the external sector, exports of goods and services picked up in Q3, expanding at a robust 9.1% rate amid strong growth in manufacturing shipments (Q2: +6.7% yoy). However, imports again outpaced exports, surging 11.2% in the quarter, likely on the back of increased imports of equipment and intermediate goods related to infrastructure projects (Q2: +9.4% yoy).
Moving into the final quarter of the year and beyond, the economy is expected to settle into a softer pace of growth from 2018’s stellar expansion. The outlook nevertheless remains favorable. Fiscal stimulus is projected to spur economic growth and a pick-up in wages and the strengthening labor market should encourage household spending. Moreover, ongoing collaboration with the IMF should propel reform and boost confidence. However, the recent escalation in regional tensions—which resulted in Kosovo slapping 100% tariffs on Serbia in late November—could derail export momentum, while slower growth in the Euro area also represents a principal downside risk to the outlook.