Serbia's economy shrank three percent year-on-year in the last quarter of 2008, and is now seen growing only 1.5-2.0 percent in 2009 as the impact of the global crisis deepens, the central bank chief said on Friday. The government still has an official forecast of 3.5 percent growth for the year and plans to revise the figure next month.
Governor Radovan Jelasic said falling domestic and global demand, declining foreign investment and shrinking credit activity would lead growth rates lower. "Our optimistic forecast for GDP growth this year has been lowered to 1.5 to two percent with a disproportionately higher risk that growth would be lower," Jelasic said.
The economy grew 5.5 percent in 2008, or 0.3 percent down from an earlier estimate, and its seasonally adjusted growth in the last quarter of the year was minus three percent year-on-year, Jelasic told a news conference. "This year has not started in the best possible way," he said. "Inflationary pressures are high, (currency) depreciation pressures have continued, the outflow of capital continues and the expansion of fiscal policy in the last quarter of 2008 resulted in January inflation of 3 percent."
On Thursday, the central bank left its key policy rate at 16.5 percent. The bank cut its two-week repo rate last month from 17.75 percent, but further easing was not in sight. "A new cut in the repo rate can take place only if the fiscal policy is tight and if the government honours its commitment to raise state-controlled prices by 13 percent plus/minus two percent," he said.