ECONOMY

Serb GDP growth slows down in Q2

BELGRADE – Underperformance in the farming sector due to drought slowed Serbia’s economic growth to 7.7 percent in the second quarter from 8.7 percent in the first three months of the year, officials said. Several weeks of hot and dry weather in July cut crop yields, with maize and soybean affected the most. But there was no sign that the country’s overall strong growth – which hit 5.7 percent in 2006 – was in danger. «The fall in agricultural output of 6.6 percent in the second quarter caused the slowdown,» Andra Milojic, deputy head of Serbia’s Statistics Office, told a news conference on Friday. «We will probably see an additional impact of this decline in the farming sector on the third-quarter GDP.» Strong consumer demand continued to support the expansion, which remains above the latest 7 percent growth forecast announced by the Finance Ministry this week. The previous growth forecast for the year was 5.9 percent. The transport sector led the economy with a 21.4 percent growth, followed by financial services which rose by 20 percent and a 19.3 percent expansion in trade. The construction industry grew 9.8 percent. «Growth remains strong and pretty much in line what we can see in other countries in the region, including Bulgaria and Romania,» said Dusko Vasiljevic of the FREN economic think-tank. «It has been driven by strong domestic and export demand. And if you exclude agriculture, you can see economic activity has hardly changed,» he added. FREN estimates second-quarter GDP growth, excluding farming, at 8.5 percent. But this does not mean the economy is in danger of overheating, Vasiljevic added. «In fact, we believe that growth of between 6.5 and 7.5 percent a year would be sustainable in the longer run,» he said. Exports rose by over 30 percent in the first seven months of 2007, while total investment hit $2 billion. Analysts believe that around $3 billion in foreign direct investment, rather than privatization revenue, is needed for sustainable growth. Serbia has been posting healthy growth since the fall of nationalist autocrat Slobodan Milosevic in 2000 ended a decade of wars and isolation. But it still lags its neighbors. Its annual GDP per capita stood at $3,842 in 2005, compared with $9,471 in Croatia.