Serbia's external debt stock inched up 0.5% y/y to EUR 25.8bn at end-December 2013,easing from a 6.6% growth the year before, as rising long-term public indebtedness was partly offset by falling banking sector foreign liabilities, central bank data showed on February 20.

According to IntelliNews calculations, the foreign debt equalled to 79.6% of the full-year GDP forecast, down from 86.8% a year ago. On a monthly basis, the external debt edged up 1.2% at end-December, following a 0.6% m/m drop at end-November.

Long-term public-sector borrowing rose 12.5% y/y to EUR 12.0bn at end-December, quickening from a 5.3% y/y hike a year ago. Long-term private external indebtedness declined 11.5% y/y to EUR 9.4bn at end-December, following a 6.5% growth at end-December 2012, dragged down by both falling banking sector and corporate liabilities.

The short-term external debt stock inched up 0.4% y/y to EUR 4.5bn at end-December, cooling from a 10.1% hike the year before, as the banking sector debt plunged 27.3% to EUR 1.0bn over the period.

We expect higher public sector external liabilities to remain the key driver of Serbia’s foreign debt growth in 2014 due to rising fiscal imbalances. Serbia plans to borrow EUR 5.6bn (up 1.8% y/y) in 2014 to service its debt and finance a budget gap that is expected to reach 7.1% of economic output.