In 2024, Serbia is projected to achieve economic growth of between 3.6% and 3.7%, a strong result amidst the stagnation of European economies. Growth for the following year is expected to range from 4% to 4.2%, according to the latest Quarterly Monitor. However, inflation is declining more slowly than anticipated.
In the third quarter, Serbia’s GDP increased by 3.1%, showing a notable slowdown compared to the first half of the year. The primary drivers of growth were IT services, construction, and industry.
The forecasts also warn that potential tariffs imposed by the USA on EU members or shortages of petroleum products could negatively impact GDP growth.
Inflation has fluctuated between 4% and 4.5% since mid-year, remaining among the highest in Europe. Its slow decline is influenced by rising domestic demand, labor costs, and administratively regulated prices. The Quarterly Monitor predicts that inflation will continue to decline slowly in the coming year due to domestic demand and rising labor costs. Additionally, higher inflation in Serbia, combined with a fixed exchange rate, leads to prices in euros approaching European levels more quickly than would be expected based on Serbia’s level of development.
Positive trends persist in the labor market, although unit labor costs are rising. Real wages continue to grow, but at a slower pace compared to previous quarters. In the third quarter, wages were 9.3% higher than the previous year, but 1.3% lower than in the second quarter.
The report highlights the significant growth of foreign investments as a key positive development in Serbia’s economic relations. Public revenues increased by 8.7% in real terms over the first ten months of the year, while public expenditures rose by 10.2%. Tax revenues saw uniform growth, with public investments, pensions, and salaries leading the increase in expenditures.
This year, the fiscal deficit is expected to be slightly lower than the planned 2.7%, while next year, there is a risk it could exceed the planned 3% due to additional expenses, such as housing loan subsidies and GSP.
The Quarterly Monitor also notes that major central banks are easing their monetary policies, while the National Bank of Serbia has kept its reference interest rate unchanged since September. The cautious approach of the NBS is justified, as inflation remains near the upper limit of the target range.
Lending to both citizens and businesses is increasing, with interest rates slightly declining, a trend expected to continue in the coming year.
