Growth for the Western Balkan region is estimated to strengthen to 3.5 percent for 2018, according to the World Bank’s latest Western Balkans Regular Economic Report, “Higher but Fragile Growth”.
Thanks to an accelerated growth, the unemployment rate dropped to 12.5% in the second quarter of 2018, which is 2.9% less than in the first one, it was said yesterday at the presentation of the World Bank’s report in Belgrade.
It was pointed out that the government budgets of the central and the general type had a surplus in the first half of the year, and it is expected to be at 0.6% of the GDP by the end of the year.
The projection that Serbian economy would grow by 4% in 2020 depends on the dynamics of structural reforms and the progress in joining the EU, the World Bank estimates. It adds that, although political events have somewhat overshadowed the economic reforms, Serbia will complete the reform of some of the biggest state companies and banks.
World Bank Senior Economist Lazar Sestovic said that the projection was based on the growth of exports and foreign investments in Serbia.
– The growth of exports is the healthiest developmental strategy of Serbia and local consumption is also recovering thanks to salary and pension raises. I believe that those two components will largely improve the economic growth over the next two years – Sestovic told the press following the presentation of the World Bank’s report.
According to him, one of the biggest challenges for Serbia is the growth of imports, and there’s also the growth of the price of energy sources, primarily oil.
– The problem is that we don’t know what will happen with those risk factors in the long term. The price of oil is already close to its all-time high, but we hope that it won’t grow further. Also, when it comes to infrastructural projects, investments grew in 2018, but it is necessary for this strong investment cycle to continue, as public investments directly influence the increase of the GDP – he said.
The World Bank estimates that economic trends in Serbia are influenced by regional political events, the potential tightening of financial conditions for the developing markets and concerns over the dynamics of growth in the European Union.
– The constant threat of early elections, the recent resignation of the Minister of Finance, work on resolving relations with Kosovo, slower than planned opening of chapters of the acquis for EU accession, a gap in formal IMF engagement and some deterioration in the country’s governance and rule of law indicators—all suggest that growth could have been faster – the report says.
According to Sestovic, the relatively low interest rates and the economic growth in Southeast Europe, which automatically reflects on Serbia and its integration in European production flows have a positive effect on the economic growth in Serbia.
– The announced salary raises in the public sector, where 700,000 people are employed, will also have a positive impact. The parameters for further salary raises in Serbia have been agreed within the program with the IMF and included in the 2019 budget projections – he said and added that, when it comes to the potential international crisis, there were no indications that it would take place in the near future or have a direct impact on the trends in Serbia.
Sestovic said that the level of public debt in Serbia had been constantly dropping for several years as a consequence of the budget surplus, but added that the total growth of public investments was still low.
– The quickly growing countries of Southeast Europe have private investments of around 25% of the GDP, whereas in Serbia it’s around 17%.
Until this percentage changes, we can’t expect a quicker growth – Sestovic said and added that Serbia’s debts were average compared to the neighboring countries.