Serbia Watch: GDP flash estimate in the green in Q1

As per flash estimate, GDP recorded the first positive growth in real terms since the outbreak of the health crisis in Q1 20 (+5.2% yoy). In Q1 2021 GDP growth recorded +1.2% yoy, supported by the expansionary fiscal and monetary policy and fewer restrictions.

First GDP growth on a yearly basis since start of the pandemic

Statistical Office of the Republic of Serbia, RBI/Raiffeisen Research

The abundant stimuli programmes provided to the private sector during 2020 (totalling EUR 5.6 bn) and another, still ongoing amounting to EUR 2.2 bn, gave tailwind to manufacturing growth, retail consumption and state sponsored infrastructural projects, resulting in healthy GDP growth at the start of 2021 (+1.2% yoy in Q1). The detailed breakdown of the GDP drivers will be published on May 31. Further, the economy was less exposed to business restrictions compared to some other countries, while industrial capacity, one of the key economy drivers, mostly continued to work. The dynamic recovery in global trade since mid-2020 represents an important ingredient for the export enlargement, displaying sound growth rates since January. Additionally, the successful vaccination programme created an alluring environment for new investors.

The government expects GDP growth of 6% this year, while we still stick to 4.5%, though the risks are tilted to the upside amid the expected recovery in the euro-zone in H2 and a boost in the capital investments under the recently revised Budget Law 2021.