Serbia’s economy has performed better than many European countries. After a 1% drop in gross domestic product (GDP) growth last year because of the pandemic, a robust rebound is underway.
The European Bank for Reconstruction and Development upgraded its 2021 GDP growth forecast to 6% in June on the back of a recovery of consumption and increase in public investments.
In June, Serbia borrowed €200m from the European Investment Bank (EIB) to help small and medium-sized enterprises recover from the crisis; and since the start of the pandemic it has allocated around €8bn (17.4% of GDP) in subsidies and payments to support businesses and the wider population.
“Everything we have been doing and have done over the past years — from achieved and preserved price stability and relative stability of the exchange rate, anchored inflation expectations and a robust financial system to the highest foreign exchange reserves on record — testifies to our commitment to stability and strengthening of the country,” said Jorgovanka Tabaković, the governor of the National Bank of Serbia (NBS), during its annual general meeting for international settlements on June 29, adding that the NBS was among the first regulators in Europe to introduce a moratorium on the repayment of liabilities, reducing the non-performing loan (NPL) ratio to 3.7%.
NPLs at Serbia’s leading banks have steadily declined in recent years, before increasing slightly last year, rising to 2.53% at Italian-owned Banca Intesa Serbia and 3.8% at UniCredit Bank Serbia, according to The Banker Database.
The stabilisation of the country’s economy from a decade ago — when inflation exceeded 11% — on the back of aligned monetary and fiscal policies can be seen in the improvements in return on equity (ROE) enjoyed some of the country’s lenders since 2016. Despite Covid-19, Banca Intesa Serbia posted a ROE of 8.7% in 2020 while UniCredit Bank Serbia’s ROE was 6.4%.
