GDP growth under 3% after all – Trends positive, problems in agriculture and energy sector

Positive economic trends in Serbia continue, but the projected economic growth of 3% by the end of the year will not be achieved due to problems in the sectors of agriculture and energy, it was said at yesterday's presentation of the double issue of the Macroeconomic Analyses and Trends (MAT) bulletin.

Ivan Nikolic, director of the Scientific Research Department at the Economics Institute, said that the July budget surplus had amounted to RSD 26.9 billion, that the public debt had been reduced by a billion euros, but also that the import and export had become equalized and that there had been climate factors reducing the revenues in agriculture and energy.

– Following the droughts, the agricultural sector will be down by at least one percentage point in the growth of the GDP, and investments are a problem too. While foreign direct investments are satisfactory, local investments are small due to the state's saving policy, and investments in private sector are not much higher either – Nikolic said.

He adds that the situation in the construction industry is different and that it contributes to the growth, as well as that the number of foreign tourists, which is higher by 21.8%, reflects positively on the turnover.

Nikolic said that he supported the government's salary raising policy and added that he expected the dinar exchange rate to remain stable.

Economist Stojan Stamenkovic said that the data for June and July did not confirm the favorable tendencies pointed to by the data from the first five months of 2017, although the industrial growth had been stepped up as a result of the normalization of the production in mining and power production.

– The trend of growth in the manufacturing industry has gone from being fast to stagnating, the foreign trade deficit is growing and it is unlikely that the projected and expected growth of the GDP will be achieved – Stamenkovic pointed out.

These projections are affected by problems with production in the energy sector from early 2017, a drop in agricultural production due to the drought, but also by very low investments, whose real growth is far below the expected amounts, Stamenkovic says.

He added that expenditures for local investments had been reduced by a fifth and that a larger number of tourists and a growth of the construction industry contributed to the growth, but that those trends were tied mostly to Belgrade.

– The food industry and the production of motor vehicles are dropping. The dynamics of fixed investments are worrying, the earnings are growing at a minimal rate and do not follow the turnover – Stamenkovic concluded.

The director of the Statistical office of the Republic of Serbia, Miladin Kovacevic, said that the unemployment rate had amounted to 11.8% in the second quarter of 2017. He added that the global economy was recovering and that the priorities were changing.

Kovacevic also pointed to a lack of local investments and the factor of an increasingly older population which lead to lowered productivity and stagnation.

He said that he expected the fiscal policy to not go further in the direction of restrictions and that efforts towards resolving old issues needed to continue, that problematic investments needed to be reduced and that structural reforms needed to be carried out.

Republički zavod za statistiku

Macroeconomic Analyses and Trends

MAT

Ivan Nikolic

Stojan Stamenkovic

Miladin Kovacevic

economic growth Serbia

budget surplus

public debt

growth of GDP

investments in Serbia

salary raises in Serbia

manufacturing industry

agricultural production

construction industry

fiscal policy