Serbia is expected to see its economy increasing by 6% in 2021, the European Bank for Reconstruction and Development (EBRD) said on Tuesday (June 29), doubling its 3% projection from September 2020.
The London-based lender expects Serbia’s economic growth to slow to 3.5% in 2022.
“In the first quarter of 2021 GDP grew by 1.7 pct y-o-y, underpinned by a strong recovery in the construction sector, but also by growth of industrial output and an increase in trade, transport and tourism activities;” EBRD’s latest Regional Economic Prospects said.
“Expansionary fiscal policy is continuing as the government has adopted additional fiscal stimulus measures to the tune of 4.5 pct of GDP (2.0 bln euros) for 2021, consisting of increased expenditures in healthcare, wage subsidies and one-off payments to pensioners and some adults.”
“The budget for 2021 also includes a significant increase in public investment. Consequently, GDP growth of 6 pct is forecast for 2021, mainly on the back of recovery of consumption and increase in public investments.”
EBRD Director for Serbia and Western Balkans Matteo Colangeli said the financial institution was satisfied with Serbia’s strong economic recovery and remained committed to providing support to the government in maintaining the accelerated growth.
Colangeli also said boosting the competitiveness of the private sector, support to well-structured investment in transport and environmental infrastructure as well as a transition to green energy would be the key priorities for better growth post-COVID-19.
“The effects of the COVID-19 pandemic on the economy were moderate in 2020. The structure of the economy—limited reliance on tourism and a relatively high share of basic goods such as food and some chemicals in manufacturing—combined with large government aid packages and less restrictive lockdown measures for most of the year, contributed to a GDP contraction of only 1 pct,” the report said.
Risks to the forecast are balanced. They relate primarily to the pace of recovery of external demand and speed of implementation of public infrastructure projects and structural reforms.
For the Western Balkans region, the bank projected economic growth of 5.1% this year, reflecting strong growth in the year to date and sustained fiscal stimulus. However, continued uncertainty about travel restrictions is weighing on the outlook for tourism-dependent economies. Growth is forecast to moderate to 3.8% in 2022.
Output in the EBRD regions contracted by 2.3% in 2020 and is expected to grow by 4.2% in 2021 (up from 3.6% expected in September 2020).
Serbia joined the EBRD in January 2001.