Erste sees Serbia's economic growth slowing to 1% in 2014 from 1.8% in 2013

By bne IntelliNews January 2, 2014

Erste Group is projecting that the economic growth of Serbia will slow down to 1% this year from the anticipated 1.8% in 2013, its analysts said in a CEE outlook 2014 report published on Jan 2.

The country will thus be the worst performer in Erste's CEE7 region this year, surpassing only Croatia whose economy is to post zero growth following five years of contraction. In 2013, Serbia was the second best performer tracking behind only Romania.

Erste projects an average growth of 2.2% for the CEE7, which also include the Czech Republic, Hungary, Poland, Romania and Slovakia. This means the region is expected to beat its 2013 growth of 0.9%.

"The GDP growth of the region will be twice as high as the growth expected for the Euro Area. What is even more important, the growth composition will be more balanced and thus more sustainable," Erste Group's head of CEE Macro/FI Research, Juraj Kotian, said in the report.

He added that 2014 will be the first year since the start of the crisis when investments will be growing in every country.

Serbia and Croatia will be the only countries whose fiscal deficits will break the 3%/GDP Maastricht limit. Serbia is the only state among the seven, which is not an EU member yet. The country is due to launch accession talks later this month.

The Erste analysts believe that the kick-off of the EU negotiations will be one of the key events in the whole year. The process will facilitate a stronger incentive for structural reforms, improve the general macro and political stability and raise Serbia's FDI prospects, the analysts said.

In August 2013, the Serb unit of Erste Group already projected the 1.8% GDP growth for the last year, which matches the latest estimate. However, back then Erste anticipated the GDP growth would quicken to 2.0-2.5% in 2014 on expectations that the external demand would pick up. But with the eurozone recovery remaining weak and uncertain, analysts probably see as diminishing Serbia's chances to outperform its strong 2013 performance in 2014.

Last year, the Serb economy benefited from strong exports of automobiles and petroleum products - which however created a high base for 2014.

Erste's projections match those of the Serbian government, which sees the economic growth cooling to 1% this year from the expected 2% in 2013.

Erste Group sees Serbia's GDP growth accelerating to 2% in 2015.

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