Intesa SanPaolo Spa through its own economist of the Study and Research Service Antonio Pesce, it has published an interesting focus on Serbia. The publication illustrates the developments and weaknesses of the Serbian economic system in the period 2013 and 2014, trying to predict what 2015 will be like.
Serbia is rated differently by the various rating agencies: Fitch places it in class B+, S&P classifies it as BB-e Moody's assigns the B1 rating. The Research Department of Intesa San Paolo assigns the country a B+ macroeconomic rating. For Sace the conditions of insurability are all classified as "opening without conditions". The indices relating to the various risks are medium, they all fall within the range between 45/100 and 58/100 except for the risk of non-payment from the banking counterparty and that from the corporate counterparty which have the worst value (71/100).
La political situation it is improving. On March 2012, 158, Serbia obtained the status of "candidate member" of the European Union. Last March Alexander Vucic was elected president, obtaining 250 seats out of the XNUMX in Parliament. Over the past two years, Vucic has supported euro-integration, with his support for politics in favor of an agreement with the Kosovo (useful for entry into the EU), the signing of the Brussels agreement and therefore the start of negotiations for accession to the European Union. The agreement regarding the common border was reached through the institution of customs. Accredited international observers expect the government to maintain a strong pro-European footprint. However, the country has not complied with the sanctions that the EU has applied to Russia in response to the tensions that have emerged in Ukraine.
Moving on to economic situation. After a negative growth in 2012 (-1,5%), in the first quarter of 2013 the Serbian economy returned to growth. remaining on a positive trend for the entire course of the aforesaid year (+2,5%). The sectors that have driven this economic recovery have been that painting (+2,2% year over year) and that agricultural (6% y/y). The country's weaknesses (high unemployment rate and public finances to be stabilized), which have worsened in the last period, weigh on the 2014 data. The GDP growth forecast for 2014 is negative (-2%). Particularly negative data was recorded in the second and third half of 2014. The GDP contracted by 1,1% and 3,7% respectively. Industrial production fell by as much as 4,8% (yoy) in the second quarter and by 14% (y/y) in the third. Exports in the last quarter recorded a -10,6% year on year. The growth forecast for 2015 is also negative but better than that of 2014 (-0,5%). In particular, the weakness of domestic demand for private consumption weighs and will weigh on the aggregate data.
Il debt Serbia, accounting for 60,2% of GDP in 2012, rose to 63,8% in 2013. The public deficit 2013 was equal to 4,5% of GDP, lower than 2012 equal to 5,4%. The tax strategy document, published by the Serbian Ministry of Finance, indicated a consolidated deficit of 2014% as a target for 5,5. To do this, it is planned to introduce a tax on financial transactions and increase the VAT rate from 8 to 10%. Public spending, expected to grow, will reach 45% of GDP.
Inflation is decreasing, the 2013 average was equal to 7,8%, in January 2014 it was equal to 3,1% and in October 1,8%. According to the central bank's (NBS) projections, inflation will remain low in the coming months and will return to growth until it returns to the target corridor (from 2,5% to 5,5%) only in mid-2015. Just to try to increase inflation last November the central bank cut the reference rate by 50bps, bringing it to 8%. One euro is currently exchanged at around 119 dinars (local currency), the average since the beginning of the year was 116,7 dinars for one euro. In March of last year the program "Standby Arrangement” of a precautionary nature with which the IMF (International Monetary Fund) had granted Serbia 935,40 million SDRs (Special Drawing Rights) and that Serbia did not need to use. The precautionary fund is expected to be renewed, with the approval of the IMF Executive Board.
The possible entry into the European Union will favor the growth of trade and the inflow of capital from abroad. However, short-term growth prospects remain fragile. According to the World Economic Forum, Serbia has achieved a slight improvement in the Global Competitiveness Index (this index has a value between 1 and 7), going from 3,7 to 3,8. In particular, the major criticalities relate to the efficiency of the bureaucratic system, the fight against corruption and the country's political stability. As far as risks are concerned, the dynamics of the public deficit and the high current account deficit remain the object of careful observation.
