Serbia's economy records strong revenue growth, EC report says

NEWS 30.01.202013:50
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The latest European Commission (EC) report on Serbia's economy based on the European Economy Technical Papersare reports and data compiled by the staff of the EC's Directorate-General for Economic and Financial Affairs, says that the 2020 budget keeps the general government deficit target at 0.5 percent of GDP, like in the 2019 revised budget of October, adding it projects robust revenue growth used to increase the average wage by some nine percent and pensions by 5.4 percent, to provide additional funding for infrastructure projects and to s

The report says that „total revenue increased by 7.8 percent y-o-y, on the back of strong revenue growth from income tax, value-added tax and social security contributions. In January-November, total expenditure went up 9.6 percent y-o-y with strong rises in capital spending (22.5 percent y-o-y).

„In November, government debt stood at 52.4 percent of estimated full-year GDP, down from 53.7 percent at the end of 2018.“

It adds that „in December, Standard and Poor’s (S&P) raised Serbia’s credit rating from ‘BB’ to ‘BB+’ (one notch below investment grade) while maintaining a positive outlook. According to S&P, the upgrade was based on robust economic growth expectations for Serbia, despite lower growth in the eurozone, and on the projected containment of Serbia’s public debt due to continued fiscal discipline and an accommodative monetary environment.“

The positive rating outlook is based on strong prospects for continued inflows of FDI that could further strengthen Serbia’s export base and its resilience to external shocks, the report says.

In December, it adds, the IMF completed the third review under the Policy Coordination Instrument, and the Fund noted the continuation of solid economic and fiscal performance.

„However,“ it also said that „Serbia remains vulnerable to spillovers from external developments, while internal risks are especially related to delays in structural reforms.“

The report noted that employment „went up in most sectors but growth was particularly strong in construction (9.3 percent-o-y) and mining and quarrying (7.5 percent y-o-y), mostly related to extraction of crude petroleum and natural gas and mining of metal ores. Manufacturing employment grew 2.9 percent y-o-y, with strong growth in the manufacture of electrical equipment more than offsetting a substantial decrease in employment in the manufacture of motor vehicles.“

According to the report, employment declined in agriculture, energy, and the public sector.

Regarding nominal net wages, EC report said they stood at 10.2 percent y-o-y in October while real net wages grew by 8.1 percent y-o-y.

The report added that the central bank (National Bank of Serbia, NBS) remained „an active participant on the foreign exchange market. In reaction to continued appreciation pressures, it bought a net EUR 235 million in October and another EUR 355 million in December.

Overall, the central bank interventions have curbed dinar appreciation against the euro to 0.5 percent y-o-y in 2019.

NBS foreign exchange reserves increased by € 2.1 billion in 2019, reaching a new high of € 13.4 billion, covering around six months’ worth of imports of goods and services.“Domestic claims of the banking sector increased by 10.5 percent y-o-y in November, the report said.