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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.

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