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2019/12/09 / Erste Group Research

Serbia Outlook: Vibrant growth outlook

Despite numerous global risk factors, economic growth in Serbia appears broad-based. While FY19 growth should slow a tad compared to last year’s print, current momentum is strong and suggest further acceleration in the medium term. In fact, robust domestic demand and expected acceleration of public investments contribution suggest risks to our FY20 GDP forecast of 4% are tilted to the upside.

Fiscal rationalization enabled almost a 20% drop of the public debt since 2015. We expect to see the figure slide towards the 50% of GDP mark next year. Our call is for a looser fiscal stance, given sizable policy space and upcoming elections, hence our forecast of a neutral budget outcome in 2020.

Despite strong domestic demand, courtesy of tight labor market conditions, upside price pressures appear contained throughout the forecasted period and we expect inflation will average 1.7% y/y in 2020, before moving to 2.3% in 2021.

Low inflation allowed the NBS to sync its monetary policy cycle to that of the ECB, hence the 3 rate cuts YTD, bringing the key rate to record-low 2.25%. As far as outlook is concerned, we expect monetary policy to remain on easing course next year, with likely additional two cuts given supportive domestic and international environment.

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General information

AuthorErste Group Research
Product nameCEE Country Macro Outlook
Topic in focusFX, Macro/ Fixed income
Economy in focusSerbia
Currency in focusSerbian dinar
Sector in focus-


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