Recent Economic Developments
Growth in 2019 is estimated to have declined slightly compared to 2018 but remained robust at 4.2 percent, driven by an increase in public investment along with a strong performance of FDI.
Consumption continued to be strong. Contribution of net-exports to growth was negative, as exports didn’t grow as fast as in the past. Looking at sectoral composition, industry increased by 0.3 percent in 2019, while agriculture output remained broadly the same as in 2018. On the other hand, services contributed significantly to GDP growth along with the construction sector.
Growth has contributed to labor market improvements. The Q4 activity rate and employment rate among population aged 15 and above continued to increase in 2019, while the employment rate remains lower among female workers and youth. The unemployment rate declined to an estimated 9.7 percent in the last quarter of 2019.
Thanks to these trends, poverty (living on income under $5.5/day in 2011 PPP terms, the standardized middle-income country poverty line) is estimated to have declined from 25.8 percent in 2015 to an estimated 18.9 percent in 2019. The consolidated general government budget showed a deficit of 0.2 percent of GDP in 2019.
Budgetary spending rose by 10.4 percent in nominal terms, driven by higher capital expenditures and the wage bill. Public debt declined to 52.9 percent of GDP by end 2019. Inflation was low and stable. With inflationary pressures low, the NBS lowered its policy rate to 1.75 percent in March 2020. External imbalances widened while FDI inflows remained strong in 2019, which was more than sufficient to cover the CAD.
The COVID-19 pandemic outbreak and the related containment measures are taking a heavy toll on the global economy, affecting the Serbian economy and leading to much lower growth than previously expected.
The economy will enter into a recession in 2020, driven by lower tourism and transport activity, lower remittances, decelerating exports and lower FDI and investment overall. To mitigate the negative economic impact of the pandemic, the Serbian authorities are providing a substantive and comprehensive response to the crisis in the relief package approved in late March.
Over the medium term (2021-2023) growth will return to its previous trajectory. This medium-term outlook crucially depends on international developments (including the impact of COVID-19), the pace of structural reforms and political developments.
Current developments are expected to lead to a small uptick in poverty in 2020. Aside from the direct impacts on health outcomes, the anticipated declines in services, lower investments, depressed demand for Serbian exports, and mobility restrictions will hurt jobs and labor income. Poor and vulnerable households may be disproportionately affected.
Risks are associated primarily with the length and depth of the crisis caused by the COVID-19 pandemic and the implementation of containment measures. The current outlook assumes that containment measures can be gradually lifted toward the end of the second quarter of 2020.
Learn more about how the World Bank Group is coordinating with partners to accelerate the international response and support countries to manage the global COVID-19 pandemic.
Last Updated: Apr 20, 2020