Quarterly Monitor of economic trends and policies in Serbia January-March 2007

As predicted in the previous issue of QM, the internal imbalance – inflation – has shifted to external imbalance – a large foreign trade deficit. Inflation was very low in Q1, with production, wages and credit growing vigorously; the market is well supplied with widely available imported goods. The big fiscal feast in late 2006 triggered the surge in spending and production which, however, resulted in a huge foreign trade deficit. In other words, the first quarter of 2007 was marked by the expansion of aggregate demand, which led to a high growth of production as well as a record foreign trade deficit and imports, while inflation was kept under control. The growth of demand was generated by the growth of wages, the effects of the fiscal expansion in late 2006, and the growth of credit.

Production grew at a very high rate in Q1: GDP growth was around 9%, or 10% when the agriculture is excluded, and the foreign trade deficit is even higher than the GDP growth: we are currently spending 22% more than we produce. The average gross wage rose as well, by 19% in real terms compared to Q1 last year, while net wages increased much more - by 24% in real terms. All this indicates: while fiscal policy was unintentionally tightened, the easing of monetary policy was deliberate. It has been announced that the new budget, which is to be adopted by late June, will be balanced, i.e. with a small deficit. This means that the analytically consolidated budget viewed from the aspect of aggregate demand (FREN’s definition) will achieve a deficit of up to 2% of GDP. It ensues that the government will not help to cut back the aggregate demand and huge foreign trade deficit.

Quarterly Montor, complete document, download (.pdf) (5.52 MB):

Quarterly Monitor by the chapters, download:

Impressum, Table of Contents (.pdf) (142 kb).

From the Editor (.pdf) (229 kb).

Trends Review (.pdf) (360 kb).

Trends - International Environment (.pdf) (191 kb).

Trends - Prices Exchange Rate (.pdf) (460 kB).

Trends - Employment Wages (.pdf) (608 kB).

Trends - Economic Activity (.pdf) (593 kB).

Trends - BOP & Foreign Trade (.pdf) (675 kB).

Trends - Fiscal Flows & Policy (.pdf) (609 kB).

Trends - Monetary Flows & Policy (.pdf) (1.53 MB).

Trends - Financial Markets (.pdf) (419 kB).

Spotlight on 1 - Is Energy Efficiency Attainable without Disproportionate Costs for Serbia? (.pdf) (357 kB).

Spotlight on 2 - The Competition Commission: One Year On (.pdf) (181 kB).

Appendix (.pdf) (725 kB).