World Bank: Serbia’s growth faster but income shrinking

Andrew CABALLERO-REYNOLDS / AFP

The World Bank said on Tuesday that Serbia’s growth accelerated in the second half of 2022 but added that real disposable incomes are shrinking with still rising inflation, led by surging food and energy prices.

“Consequently, the 2022 current account deficit almost doubled but was still fully financed by net FDI. Strong revenue performance and controlled spending have reduced the fiscal deficit to 3.1 percent of GDP,” the WB update report said.

Poverty is estimated to have declined slightly from 9.1 percent in 2021 to 8.5 percent in 2022, the report said and added that the public debt declined to 55.2 percent of GDP from 56.5 percent of GDP in 2021.

The World Bank said Serbia’s economy is expected to grow by about 3 percent annually driven by consumption and to a lesser extent investment, while net exports will have a negative contribution as imports are projected to increase faster than exports. Inflation will remain moderate and is expected to return to the target band only in 2024. Poverty in 2023 is projected at 8.0 percent, lower than its 2022 level. The fiscal deficit and public debt are expected to remain on their downward path.

The report warned of multiple risks, both external and domestic, weighing on the positive outlook including prolonged inflationary pressures , the EU economic outlook and the performance of Serbia’s other main trading partners and domestic risks associated with national and regional political developments and SOE governance.

“To defy all these risks and achieve faster growth, Serbia should implement structural reforms to boost potential output, through increased human capital (improving the quality of education and increasing the level of labor-force participation), higher productivity (particularly by attracting higher quality FDI) and an improved business environment (including regulatory predictability and increases to market competition),” the report said.