Macroeconomic Forecast Serbia & Montenegro

GDP growth measured 5.2% year-on-year (y-o-y) in Q105, according to Serbia's statistics office, which represented a deceleration compared to the 7.1% recorded in the same period last year. A decline in industrial activity, most notably a 19% y-o-y fall in construction output, contributed to moderating expansion, though this was offset by strong growth in trade (18.9%), transport (19.7%), and financial intermediation (15.4%). We expect real GDP growth to reach 6.6% in 2005, and remain at a similar level throughout the forecast period, Government and central bank initiatives to cut double-digit inflation could dampen economic activity, representing the biggest downside risk to our forecasts.

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