FAS keeps up Serbia's economy - European Commission foresees mild recovery for Serbia in 2013

Despite a series of negative trends, Serbia’s economy is still standing on its feet thanks to a dramatic rise in exports following the opening of a Fiat factory in Kragujevac, the European Commission (EC) estimated in its latest report on economic trends in 2013.

“The economic activity in Serbia deteriorated sharply in 2012 due to very weak domestic demand,” EC experts noted in the quarter report, but they envisaged stabilization and slow recovery in late 2013 and early 2014.

The basis for this forecast is the opening of the Fiat factory in Kragujevac, thanks to which the exports of goods have accelerated substantially, increasing by more than 30 percent in euro terms in the first two months of 2013, which helped reduce the imbalance between exports and imports, said the EU experts in the report that includes all EU member states and candidate countries.

Besides that, Serbia is expected to have a more favorable season for agriculture, which was hit severely by a cold winter and a drought in the s summer of 2012.

Serbia’s gross domestic product (GDP), which dropped by 1.7 percent in 2012, should see a rise of 1.7 percent in 2013, and could reach 1.9 percent in 2014, EC experts note.

Unemployment has been mentioned as one of the greatest problems of the Serbian economy, as the joblessness has been on the steady rise for several years now, the report says, adding that the envisaged restructuring of highly inefficient socially-owned enterprises may lead to further lay-offs

On the other hand, a delay in these reforms would most likely lead to a budget deficit increase which would have to covered by new foreign loans, EU experts warned.

The fiscal consolidation measures adopted last autumn are unlikely to bring the reduction of budget deficits envisaged by the authorities. The deficit is expected to reach 4.5 percent of GDP by the year’s end, which is one percent more than it was planned.

The full text of the Economic and Financial Affairs Directorate’s report has been published on the EC website.