Research Detail
| 2021/12/07 / Erste Group Research |
Economy marches forward on strong domestic footing Unfazed by the pandemic environment, the Serbian economy marches forward on a strong footing. Household consumption and investments remain the key pillars of growth, while the net external contribution works in the opposite direction. After slightly stronger than expected growth in 3Q (7.7% y/y), we fine-tune our FY21 GDP forecast, lifting it 0.3pp to 7.3% y/y. Growth next year is projected to return to the pre-Covid pace of expansion, at around 4.5%. After averaging 4.4% y/y in 3Q, inflation is expected to peak in the last quarter of the year and early in 2022 with prints slightly above 7% y/y, reflecting almost exclusively supply-side pressures. We expect price growth to average 4% y/y this year, accelerate to 4.8% y/y in 2022, before dropping to 2.6% y/y in 2023. The NBS has started to tighten its policy mix, albeit leaving the key rate unchanged at 1% for now, opting for hikes of the 1wk repo rate and withdrawal of excess dinar liquidity from the system. With both inflation and growth above expectations this year, public revenue collection surpassed the budgeted figures, allowing for a lower than planned budget deficit at under 5% of GDP. The proposed budget envisages a further reduction of the deficit to 3% of GDP in 2022. With the credit rating preserved during the crisis period and the fiscal situation under control, the country now hopes to reach its long-term goal, an IG rating, hence a possible strong catalyst for the bond market. |
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General information
| Author | Erste Group Research |
| Date | 2021/12/07 |
| Language |  |
| Product name | CEE Country Macro Outlook |
| Topic in focus | FX, Macro/ Fixed income |
| Economy in focus | Serbia |
| Currency in focus | Serbian dinar |
| Sector in focus | - |
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