Serbian economy likely to head for contraction

Serbian economy likely to head for contraction

BELGRADE - Agence France-Presse
Serbian economy likely to head for contraction

A open market vendor counts his earnings in downtown Belgrade. The Serbian economy may shrink 1.5 percent by the end of the year, says finance minister. AFP photo

Serbia’s economy is likely in recession and will contract by up to 1 percent this year, contrary to an earlier forecast of 1.5 percent growth, Finance Minister Mladjan Dinkic has said.

Dinkic said on Aug. 8 that the Serbian economy had contracted by 1.3 percent in the first quarter and probably by 0.6 percent in the second quarter.

A recession is commonly defined as two consecutive quarters of contraction. Official second quarter estimates of gross domestic product (GDP) are not due until next month.

“Gross domestic product will fall between 0.5 and one percent” this year, Beta news agency quoted Dinkic as saying.

Serbia’s 2012 budget is based on a projection of 1.5 percent economic growth, but the International Monetary Fund already has a much lower estimate of only 0.5 percent growth.

The minister warned that the slowdown in economic activity would continue with a drought having hit agricultural production.

Serbia, which was given EU candidacy status in March, saw a change in power earlier this year by electing former allies of late strongman Slobodan Milosevic who ruled the country during the bloody 1990s wars in the Balkans.

The new government said it wanted to restart talks with the IMF which in February froze a one-billion-euro stand-by loan because Serbia did not keep to figures agreed for the 2012 budget.
Dinkic has said he would like to negotiate a new agreement with the IMF, as the existing one is no longer pertinent.