Look for:

Our offer for

Research Detail

2020/09/11 / Erste Group Research

Growth forecasts slightly upgraded

The resilience of the Serbian economy so far can be contributed to its structure and the high share of the basic goods industry. Still, with forecasted negative growth in both remaining quarters, we continue to expect contraction for the year, albeit a smaller one. The overall risks now seem balanced; we hence slightly upgrade our 2020 and 2021 GDP forecasts to -1% y/y and 5% y/y, respectively.

After bottoming out in April (0.6% y/y), inflation picked up, stabilizing around the 2% y/y mark by mid- year. The initial low inflation was mainly due to the high base effect in vegetable prices, which disappeared in June, and low gas prices. Overall, inflation is still expected to remain stable and inside the lower part of the targeted band throughout the year, with 2020 and 2021 average CPIs expected at 1.7% y/y and 1.8% y/y, respectively.

After cutting the key rate by a total of 100bp YTD and safeguarding exchange rate stability, the NBS is now focusing more on spurring credit growth. Effectively, the NBS is subsidizing corporate credit and thus ensuring that the fallout from the crisis is contained. Meanwhile, the rate path ahead remains sensitive to external developments, the inflation outlook and stability of the exchange rate. Overall, we see the risks as balanced and expect the NBS to remain on hold for the rest of the year.

The consolidated budget gap after 7M20 stands at EUR 2.8bn (6% of GDP), due mostly to the 24.4% y/y rise in expenditures, while the revenue drop stands at an acceptable 5% y/y. As subsidies have practically tripled compared to the same period last year, reaching EUR 1.3bn, and with additional smaller relief measures in place for 2H20, the gap will be substantial this year. We expect a budget deficit of EUR 3.5bn, or 7.5% of GDP.

Only three parties entered the parliament following the June elections, which were again marked by a landslide victory of the ruling Serbian Progressive Party. A government has not yet been formed, with the legal deadline being November 3. There is some speculation on new(old) minister names, while most recent statements suggest the new government will be sworn in at the end of September. It appears that economic cooperation will spearhead the political negotiations between Serbia and Kosovo.

PDF Download Download PDF (135kB)

General information

AuthorErste Group Research
Product nameCEE Country Macro Outlook
Topic in focusFX, Macro/ Fixed income
Economy in focusSerbia
Currency in focusSerbian dinar
Sector in focus-


We use cookies and web analysis software to give you the best possible experience on our website. By continuing to browse this website, you consent for these tools to be used. For more details and how to opt out of these, please read our Data protection policy.


Any information, material and services regarding financial instruments and securities provided by Erste Group Bank AG or any of its affiliates (collectively “Erste Group“) on this and any linked website hereafter (jointly the “Websites”) shall be exclusively to investors who are not subject to any legal sale or purchase restrictions (the “Interested Party“).

The publication and distribution of information as well as offering and selling of products and services described on the Websites is prohibited by law in some jurisdictions. For this reason, persons in countries in which the publication as well as the offering and selling of products and services described on the Websites are not permitted by law, must not enter the Websites and/or acquire the products displayed on the Websites.

Neither Erste Group nor any third party shall offer access to the Websites or offer the products to especially, but not limited to citizen/residents of the United States and “U.S. person” (as defined in Regulation S under the US Securities Act 1933 as amended). For this reason, the distribution or redistribution of the information, materials and products into United States or into any other jurisdiction where it is not permitted under the applicable law, as well as to the citizens/residents of these countries shall be prohibited. The securities displayed on the Websites have not been and will not be registered under the US Securities Act of 1933 and trading in the securities has not been approved for purposes of the US Commodities Exchange Act of 1936. For this reason the securities may, inter alia, not be offered, sold or delivered within the United States or, for the account and benefit of U.S. persons.

The Interested Party is solely responsible to examine, whether he may enter the Websites under the law applicable to it. Erste Group shall not be responsible for the distribution of content of any of the Websites to individuals or entities which provide false information about their right to enter the Websites. For this reason Erste Group shall not be liable for any legal claims or damages which may result from the unauthorized entering or reading of the Websites.

By agreeing to this hereto, the Interested Party confirms that
(i) It has read, understood and accepted this Information and the Disclaimer;
(ii) It informed itself about any possible legal restriction and warrants that it is not restricted or prohibited to enter the Websites according to any law applicable; and
(iii) It does not make available the contents of the Websites to any person who is not qualified by law to enter the Websites.