EBRD forecasts accelerating growth for Serbia in 2024

In 2025, growth is forecast to accelerate to 4 percent, the EBRD said in its publication Regional Economic Prospects.

It said the Western Balkans will see growth accelerate from 2.5 percent in 2023 to 3.4 per cent in 2024 and 3.7 percent in 2025, driven by strong tourism inflows in Albania, sustained consumption growth in Montenegro, as well as strong investment in Serbia.

After 2.5 percent GDP growth in 2022 and 2023, the Serbian economy picked up significantly to 4.3 percent year on year in the first half of 2024, said the EBRD, explaining that the acceleration was driven by services, predominantly trade, tourism and catering, and construction.

The current account deficit doubled compared with the first half of 2023, reaching over 1.2 billion euros (3.3 percent of GDP), driven by high imports, dividend outflows and lower incoming government transfers from abroad.

Net foreign direct investment (FDI) inflows remained at the same level as in the first half of 2023 (at 2 billion euros).

Inflation has stayed elevated compared with the rest of the region, at 4.3 percent in July 2024, driven by core inflation. However, the policy rate was cut twice in recent months from its peak at 6.5 percent to 6 percent in July 2024, said the EBRD.

The fiscal stance remained expansionary, with a further rise in public wages and pensions announced for this year.

The Bank said growth is expected to reach 3.8 per cent in 2024 on the back of strong performance in the first half of 2024 as well as expansionary fiscal and monetary policy, boosting consumption and capital investment.

In 2025, growth is forecast to accelerate to 4 percent “but tight labor markets, geopolitical instability and adverse weather conditions constitute downside risks.”

According to EBRD’s assessment, successful implementation of reforms in state-owned enterprise governance as well as carefully planned and executed public investments may boost growth.

The EBRD is a leading institutional investor in Serbia and has now invested more than 9 billion euros through 362 projects, of which the majority supported the private sector.

The Bank’s focus in the country is on supporting private-sector competitiveness, green energy transition and sustainable infrastructure.