BELGRADE – According to the National Bank of Serbia (NBS) projection, the effects of investments and fiscal consolidation should bring the current account deficit down to below seven percent of GDP in 2013.


After more than a triple reduction in 2009 and 2010 relative to the pre-crisis period, the current account deficit has widened over the last two years, reaching 10.5 percent of GDP in 2012, the central bank said in its August inflation report.

The increase was due mainly to the investment cycle in the automobile and oil industries, which entailed higher imports of equipment and intermediate goods, and to high pre-election fiscal spending in the first half of 2012.

The expected improvement this year will be backed by improvements in the trade balance spurred by an increase in export.

In the first six months of 2013, the current account deficit was EUR 890.7 million, 53.5 percent lower year-on-year, mainly on account of a considerable increase in exports relative to imports.

A rise in exports was the most evident in the automobile industry, thanks primarily to Fiat Serbia, but also to producers of car components. Low imports in the same period are due to the completion of investment cycles and low domestic demand.

Positive trends with respect to a reduction in external disequilibrium are also confirmed by exports, which exceeded the pre-crisis level by 36.4 percent in the first six months, while imports fell 9.8 percent below this level.

Provided exports and imports remain at the second quarter levels until the end of 2013, all other things being equal, the current account deficit could fall below six percent of GDP this year.

The current account deficit equalled 5.7 percent of GDP in the first half of the year. The improvements were due to favourable trade movements, lower interest outflows and higher remittance inflows compared with the same period last year.

At the annual level, the current account deficit will fall to around EUR 2.1 billion and the trade deficit to around EUR 4.5 billion, which is a reduction of 33.4 percent and seventeen percent respectively relative to last year.

In addition, the physical volume of exports is likely to accelerate to 11.5 percent, while that of imports may slow to 1.8 percent. Interest outflow will amount to around EUR 950 million this year, and current transfers inflow to around EUR 3.1 billion.

A reduction in the current account deficit is expected in the coming years as well, but at a more gradual pace.