Serbia’s economic growth will slow to 3.2 percent in 2022 due to global crises, although earlier forecasts had indicated that the growth rate would be 4.4, it was said at a conference on the presentation of the semi-annual report on the state of the economy in the Western Balkans.
It is estimated that Serbia has largely recovered from the Covid-19 pandemic, achieving real GDP growth of 7.4 percent in 2021, stimulated by strong private consumption and investment.
The presentation was organized by the World Bank, and the report was presented and commented by the director of the World Bank office in Serbia, Nikola Pontara, senior energy economist Katharina Gassner and leading economist for the Western Balkans Richard Record. According to the report, the consequences of the war in Ukraine are having a negative impact on exports from Serbia and on foreign direct investment, remittances and tourism revenues.
It was also stated that Serbia will maintain macroeconomic stability despite the risks in 2022.
Inflation is already on the rise in Serbia, and further acceleration can be expected, just as in other eastern European countries due to the increase in food and energy prices on world markets, the conference said.
World Bank Director in Serbia Nikola Pontara said the fiscal deficit could be higher than projected due to slowing economic growth and the need for higher public spending in the form of subsidies and guarantees to support companies in the electricity and gas sectors affected by the crisis.
“The Serbian economy is expected to achieve stable growth of around 3% per year in the medium term, which is similar to the growth rate recorded before the pandemic”, said Pontara.
In his opinion, the prospects depend primarily on external factors, such as the war in Ukraine and the global energy crisis, but also on the speed with which Serbia implements internal reforms to ensure financial consolidation of its public companies.
Just as for Serbia, growth projections have been adjusted for all other countries in the Western Balkans, and according to new analysis the region’s growth rate for 2022 will be 3.1 percent.
World Bank Director for the Western Balkans Linda Van Gelder said that despite a strong recovery from the pandemic, the Western Balkans are now facing new challenges whose impact is further aggravated by the war in Ukraine.
She said that the greatest challenges facing the countries of the Western Balkans are the growth of energy and food prices, high inflation and the slowdown in trade and investment.
“The countries of the Western Balkans will need carefully thought-out support in the form of public policies that will enable them to find a way out of these crises and protect the important results achieved in 2021, including in poverty reduction”, concluded Linda Van Gelder.
The report states that there can be no sustainable growth in the Western Balkans without structural reforms aimed at raising productivity, strengthening competition, investing in human capital and improving governance.
It was concluded that in this uncertain environment, economic growth would be stimulated by measures to reduce regulatory costs for business, increase market competition, support the participation of all citizens in the labour market and strengthen the independence of public institutions.
The region’s energy sector was also discussed at the conference, and senior energy economist Katharina Gassner said that the energy crisis is clearly affecting all Western Balkan countries.
“The sensitivity of countries varies depending on the extent to which countries rely on imports of natural gas and electricity”, said Gasner.
She pointed out that at the very beginning of the crisis governments in the Western Balkan implemented policies to mitigate the shocks of energy prices on households and on small and commercial companies.
She also explained that not all countries have the capacity to mitigate shocks due to the energy crisis, and stressed that Serbia is among those that had greater opportunities to implement measures to protect their people and companies.