It is vital for Serbia to preserve the attractiveness of its business environment in order to secure further FDI inflows. It is simultaneously also necessary to open a channel to intensify domestic private investments in order for Serbia to achieve constantly high investment rates of 25% of GDP and more
The growth slowdown in Serbia, to around 2%, is the result of external circumstances related, on the one hand, to the war in Ukraine and, on the other, to the nature of the world economy’s recovery following the pandemic. In this framework, rising inflation came as a result of very complex movements in the world economy and the pumping of huge monetary infusions both during and after the pandemic. Measures aimed at curbing inflation move in the direction of slowing growth. Serbia should continue with agreed measures, both monetary and fiscal, to halt inflation. The entire world is fighting inflation, Serbia included, and inflation in Serbia now is on a downward trajectory and by year’s end should reach single digits, around 8%.
It is very important for the GDP growth rate to be maintained at 2% or more this year, because we would thereby avoid entering the zone of recession that’s confronting most of the world’s developed countries. Under such complex international geopolitical circumstances, it is crucial to devise cautious and well-balanced economic policy measures that yield results in terms of reducing inflation, on the one hand, while maintaining the economy in the zone of positive growth of 2% and more, on the other. When it comes to increasing the growth rate in the future, it would be very advantageous to improve the operations of public companies, particularly in the electricity industry, and to reduce corruption.
When it comes to increasing the growth rate in the future, it would be very advantageous to improve the operations of public companies, particularly in the electricity industry, and to reduce corruption
We should add to this the fact that it is vital for Serbia to maintain the attractiveness of the business environment in order to secure two things: firstly, the continued enticing of FDI, which is very important because it ensures the influx of new technology, but also the growth of employment rates and export performance; but it is secondly also necessary to open a channel to intensify domestic private investments in order for Serbia to achieve constantly high investment rates of 25% of GDP and more.
When it comes to future prospects, it should be stated that measures taken in Serbia in an effort to combat inflation, as in the rest of the world, serve in the direction of halting inflation. Raising benchmark interest rates, as a basic market mechanism for curbing inflation, yields its results. It is very important to be patient and steadfast when it comes to measures, because monetary policy measures have a delayed impact, usually by around 12 months. This means that this much time is needed, with anchored inflationary expectations, to curb inflation. The process that’s been initiated to reduce inflation in Serbia should return the annual inflation rate to around 8% by December of this year, while it will return to the target framework, i.e., below 4.5%, during the second half of 2024.
