Serbia’s 9-mo current account gap narrows 56% y/y, equalling to 3.4% of GDP

By bne IntelliNews November 20, 2013

Serbia's current account deficit shrank 56% y/y to EUR 1.1bn in January-September 2013 on the back of lower foreign trade gap and higher remittances inflow, central bank (NBS) data showed. The reading accounted for 3.4% of the full-year GDP projection, down from 8.2% a year earlier, according to IntelliNews calculations.

The nine-month trade deficit improved to 8.0% of the full-year GDP forecast (EUR 2.6bn) from 13.3% of GDP (EUR 4.0bn) a year ago as strong export growth offset a mild increase of imports. Exports climbed 22.1% to EUR 10.5bn over the period, underpinned by higher motor vehicle and oil products sales abroad. Fiat Automobili Srbija (FAS) and oil firm NIS, controlled by Russia’s Gazprom Neft, were the main exporters over the period with a total of EUR 1.34bn worth of sales or close to a 17% share in total exports. Imports grew by a moderate 4.6% y/y to EUR 13.2bn in January-September reflecting subdued domestic demand. The current transfers’ surplus rose 12.2% y/y to EUR 2.4bn, thanks to a 19.7% annual increase of private remittances, totalling EUR 1.7bn.

The financial account surplus narrowed 59.8% y/y to EUR 923.7mn in the first nine months of the year as recovering FDI and higher portfolio investments couldn’t offset the negative balance of other investments.

Net FDI stood at EUR 518.1mn in January-September, swinging from a negative EUR 11.2mn a year earlier. They covered nearly 47.8% of the current account gap. The 9-month net portfolio investments rose to EUR 932.1mn from EUR 151.1mn a year ago.

Serbia's central bank expects the current account deficit to fall to 4%-5% of GDP in 2013 from 10.5% in 2012 helped by rising automobile and oil products sales abroad. FDIs are also expected to increase to EUR 700mn (2.1% of GDP) this year after dropping to a ten-year low of EUR 232mn in 2012 (just 0.8% of GDP). Major projects by foreign investors include a EUR 100mn investment by the UAE's leading agriculture products supplier Al Dahra in building a large irrigation system in fertile northern Serbia and a further EUR 100mn in the acquisition of several farming companies. Furthermore, Abu Dhabi's Mubadala is currently in talks with the government on the construction of an aircraft components and chip factory in the country.

Serbia's balance of payments, EUR mn Jan-Sep'12 Jan-Sep'13 Change,y/y,%
Current account -2,461.2 -1,082.9 -56.0
Foreign trade gap, goods and services -3,966.8 -2,634.7 -33.6
Income,net -595.9 -805.4 35.1
Current transfers 2,101.5 2,357.3 12.2
-- private remittances (inflow) 1,403.5 1,680.3 19.7
Financial account 2,295.3 923.7 -59.8
FDI,net -11.2 518.1 /
Portfolio investment,net 151.1 932.1 516.8
Other investment,net -199.9 -716.5 258.4
Change in NBS reserves (-increase) 2,355.3 190.0 /
Overall balance -2,355.3 -190.0 /
Source: NBS      

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