EBRD lowers GDP growth forecast for Serbia from 1.7 to 1.3 percent

On Friday (14 March 2014), the European Bank for Reconstruction and Development (EBRD) cut the GDP growth forecast for Serbia by the year's end from 1.7 to 1.3 percent. The Bank voiced its expectation that the return of the Eurozone to the path of economic growth would have a positive influence on the overall economy in Serbia.

Export will remain the main driver of economic growth, given that domestic consumption is going to stay at a low level, public debt will exceed 60 percent of GDP by the year's end, whereas budget deficit is expected to reach between 7 and 8 percent of GDP by the end of 2014, it is stated in the latest issue of the Economic Outlook for Serbia published by the EBRD.

Serbia has made a significant progress when it comes to the improvement of business climate, but additional structural reforms in the field of labor, privatization, bankruptcy and building permits are necessary to encourage the development of private sector.

The share of private sector in the economy is still modest with many companies not being competitive enough to ensure a long-term sustainability, while numerous companies require financial reorganization due to the crisis, the EBRD said in aforementioned publication.

The EBRD assessed that the inflow of foreign direct investment to the country was not big enough.

- Although the financial sector successfully survived the economic crisis, it is still standing on a shaky ground due to a high level of non-performable loans, euroization and a time-consuming process of reducing the public debt. Additional consolidation of the banking sector is also necessary - the EBRD pointed out.

The Bank also drew attention to big infrastructure omissions, stressing that the range of effects of fiscal policy instruments was limited.

Implementation of infrastructure projects is behind the schedule, although they all got the necessary funding.

Since the start of its operations in Serbia in 2001, the EBRD has contributed about EUR 3.5 billion and co-financed more than 175 projects with over EUR 1.5 billion.

The Bank invests in the financial sector, industry, trade, agriculture, and infrastructure.