Serbia is set to face a significant slowdown of GDP growth and accelerated inflation, says Milojko Arsic, professor at the Belgrade Faculty of Economics.

Speaking at Thursday’s presentation of the new issue of the economic bulletin Kvartalni Monitor, Arsic said Serbia’s external trade deficit was rising and that the labour market was the only sector registering solid performances.

The uncertainty surrounding this year’s GDP growth remains high, he said, noting that the publication’s authors agreed that it could be expected to be around 3 pct.

In addition to the crisis resulting from the Ukraine war and energy prices as two global problems, the national GDP is also impacted by specific local problems in the energy sector and it is still uncertain how they will be solved, Arsic explained.

“It is quite certain that the increase of interest rates will slow down the economy additionally,” he said, adding that inflation would be higher and more sustained than expected.

He explained disruptions on the supply side were a result of COVID-19 and the Ukraine war but that there were also economic reasons behind them, such as a fiscal and monetary expansion.

“I expect inflation to continue into the second half of 2022. It is quite certain that a reduction of inflation calls for restrictive fiscal and monetary policy measures, an increase of interest rates, a reduction of the amount of money and the fiscal deficit… We could be expected to end the year with 12 pct inflation,” Arsic said.