In 2015, Serbia is expected to achieve a slight gross domestic product (GDP) growth of 0.5%, according to the forecast of the International Monetary Fund (IMF). Fiscal adjustments under an undergoing IMF programme will limit domestic demand and high non-performing loan (NPL) levels will continue to impede access to financing. The lower oil prices, the economic recovery of the EU, Serbia’s main trade partner, and the low base from 2014 are the factors to determine a growth in 2015.
Serbia's economy experienced a tough 2014. The country's GDP was falling on annual basis through all of the year's quarters and posted a 1.8% overall drop in 2014. Heavy rainfalls in May caused devastating floods which hit the country's agriculture and energy sectors, and caused damages estimated at more than 1.5 billion euro. Industrial production dropped in all sectors, most notably in the mining, and electricity, water and gas supply. Domestic consumption was weak with lending activity going down due to the high level of NPLs. In August 2014, Serbia's Privatization Agency issued a public call for expressions of interest from potential investors for the privatization of 502 loss-making state-owned enterprises in order to curb government debt, as well as to boost the private sector, and foreign direct investments (FDI) inflow. The pool of companies under privatisation includes drug maker Galenika, RTB Bor, one of Europe's largest copper mines, chemical producers maker Petrohemija and HIP Azotara, carmaker Zastava, and agricultural conglomerate PKB Korporacija. In terms of business regulations, Serbia was SEE's second worst performer in World Bank's Doing Business 2015 report. The country was placed 91st, dropping from the 77th position in the previous year's edition. Serbia made transferring property more difficult by eliminating the expedited procedure for registering a property transfer, according to the report.
Serbia managed to improve its competitiveness, according to the Global Competitiveness Report 2014-2015 published by the World Economic Forum. Serbia ranked 94th out of 144 countries or seven places higher than its position in the 2013-2014 report. According to the latest report, inefficient government bureaucracy, access to financing, and corruption are the main factors, which impede the country's competitiveness.
Serbia benefited from more than 3 billion euro in remittances from Serbian emigrants in 2014, according to the World Bank data. The remittances account for more than 8.0% of the country's GDP, thus making Serbia one
of the SEE countries that are highly dependent on such inflows. In 2014, remittances from Germany occupied the leading position with a 17.3% share of the total remittances value, followed by inflows from Switzerland, and Austria, each with a 10.6% share.
The country's GDP, including changes in inventories and net acquisition of valuables, decreased by a real 1.8% and totalled 1,042.5 billion dinars in the fourth quarter of 2014, according to preliminary data of the Statistical Office of the Republic of Serbia (SORS).
Final consumption, which contributed 92.0% to the GDP (excluding changes in inventories and net acquisition of valuables), decreased in value by 0.7% y/y in the fourth quarter of 2014. Gross capital formation remained flat on the year. Exports and imports grew by 0.9% and 1.6% y/y, respectively.
The gross value added (GVA) generated by the national economy decreased by nominal 2.0% y/y in the fourth quarter of 2014 and totalled 685.2 billion dinars. The industrial sector fell in value by 9.0% and its share in the GVA structure decreased to 23.4% from 25.2%. The services sector recorded a 0.3% annual decrease, slicing a 59.8% share in the GVA, up from 58.8% in the corresponding quarter of the previous year. The agricultural sector registered an annual rise of 0.9%, thus increasing its share in the GVA to 10.7%, from 10.4%.
Industrial output was down by 6.5% in 2014. The electricity, water and gas supply sector reported the highest decline of 20.1%. The mining sector and the manufacturing sector fell by 16.7% and 1.4%, respectively.
The manufacture of machinery and equipment n.e.c. was the segment with the highest annual production growth of 29.0%. On the other end was mining of coal and lignite, which reported an annual drop of 25.8%.
The average annual inflation slowed down to 2.9% in 2014 from 7.8% a year ago, according to SORS data. The highest inflation of 9.5% was registered in alcoholic beverages and to- bacco products, while clothing and footwear was the only product group that got cheaper by 1.8%.
Unemployment in Serbia narrowed to 18.9% of the total labour force in 2014 from 22.1% in the previous year, according to data of SORS.
The employed population aged 15 years and older was 2.42 million in 2014, up 4.8% y/y. The youth (population aged 15-24) unemployment rate remained high, at 47.1%.
Money aggregate M1, or narrow money, jumped by 11.0% y/y to 430.9 billion dinars.
Loans to the non-government sector totalled 1,863.3 billion dinars in December 2014, up by 4.5% y/y.
Loans to non-financial corporations grew by 2.6% y/y to 1,138.7 billion dinars, while household loans rose by 7.6% y/y to 724.6 billion dinars. House purchasing loans climbed by 6.9% to 336.9 billion dinars.
The gross external debt increased, totalling 26 billion euro at the end of December 2014. It widened by 0.7% compared to December 2013. In comparison to end-2012 the gross external debt grew by 1.2%, or 309 million euro.
In 2014, the current account gap narrowed to 1.985 billion euro from 2.098 billion euro in 2013, according to NBS data. Net direct investments were negative at 1.24 billion euro, compared to a deficit of 1.298 billion euro in the previous year.
The trade deficit stood at 4.4 billion euro in 2014, down by 2.3% compared to the previous year, according to SORS.