Serbian GDP to Drop 4.5% to 9.1% This Year?

The gross domestic product (GDP) if Serbia will drop 4.5% to 9.1% this year due to the negative effects of the COVID-19 pandemic on the economy, said economic-financial consultant Dragovan Milicevic.

He told Beta that the Serbian economy was in a kind of a debt loop, as interests alone cost the country 800 million to one billion euros each year, “eating up” the GDP growth.

At the end of February 2020, Serbia's public debt was at EUR 24.36 billion, making up 49.1% of the GDP. Since 2000, the lowest public debt, EUR 9.7 billion, was recorded in 2004, whereas the largest one was in 2016, when it amounted to EUR 24.82 billion.

Several days ago, the president of Serbia, Aleksandar Vucic, stated that the drop of Serbia's GDP will be 1% to 1.5% and that Serbia would be among the three countries in Europe with the lowest GDP and that it would aim to have the lowest one.

– There's no way that Serbia can have such a small GDP drop – Milicevic said.

He added that the GDP in Serbia had been worth around EUR 44 billion the previous year and that it could drop to around EUR 40 billion in 2020.

According to him, around EUR 3 billion needs to be secured this year for the repayment of principal public debt, and the budget re-balance as a result of anti-crisis measures, which amount to EUR 5.1 billion, envisages an increase in the budget deficit from 0.5% to 7%, which is around EUR 3.5 billion.

– Serbia is in a difficult situation, but can still repay debts. It will become dramatic if foreign investments stop coming in and if foreign companies start taking out the profit – Milicevic said.

He estimated that, in the current situation, the banks are reluctant to issue retail and corporate loans, as the interest rates are low, and the risk of the debtors not being able to repay the loans is high.

Milicevic believes that the government's promise of average salaries of EUR 900 in 2025 can in no way be fulfilled.

Dragovan Milićević

Aleksandar Vučić

gross domestic product

GDP

coronavirus

pandemic

covid 19

public debt

debt repayment

interest rates

deficit

budget

low interest rates