EBRD predicts 3.3% economic growth for Serbia for 2011

(the European Bank for Reconstruction and Development)

The EBRD has revised up slightly its growth forecasts for emerging Europe for 2011, including Serbia, but the bank's latest economic outlook warns of mounting risks from the eurozone that could jeopardize economic prospects for the region.

Against the backdrop of a continuing recovery from the global economic crisis, the EBRD's economists are predicting growth of 4.8% across the 29-country region in 2011, up from 4.6% seen in May. The 2011 forecast for Serbia has been increased from 2.9% in May to 3.3%, it was announced on the website of the Serbian Chamber of Commerce (www.pks.rs).

But the EBRD's latest Regional Economic Prospects report says risks to the outlook are continuing to mount.

- An escalation of the eurozone crisis would pose serious risks to growth and recovery across the region, especially in south-eastern Europe and the new EU members - says Erik Berglof, the EBRD's chief economist.

Individual areas within the EBRD region would be impacted by any worsening of the eurozone crisis according to their varying circumstances, the report said. The recovery in south-eastern Europe was still weak and this region was most directly threatened by the financial instability related to the eurozone turmoil, as significant parts of the region's banks are owned by Greek banks. The report said that, in the event of an escalation of the crisis, some of these banks could require financial support and might struggle to keep up their lending to the local economies.

"This could contribute to a notable downturn in economic growth in that region," the Bank warned.

The deep integration with western European markets of central Europe and the Baltic states would mean that this region would be exposed to disruptions in financial markets, increases in bank funding costs and a slow-down in eurozone growth, the report reads.

CIS countries were likely to be less affected by eurozone debt market instability. Energy exporters in the CIS would be hurt by eurozone stagnation that could stem from the turmoil through its impact on commodity markets. This could result in lower demand for commodities including oil and gas, reducing their currently high prices.

Potential slow-downs in the US - where market confidence could falter due to protracted debt ceiling negotiations - or in China posed further risks to the transition region, the report said.

EBRD Evropska banka za obnovu i razvoj Beograd