As the war in Ukraine continues, Serbia’s projected GDP growth shrinks

The impact of the war in Ukraine is spilling over to the Western Balkans mostly through commodity channels.

View of the evening Belgrade cityscape
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Belgrade, Serbia.

A new World Bank report forecasts economic growth in the Western Balkans to decline to 3.2% in 2022 and notes that spillovers from the war in Ukraine impact the sub-region primarily through commodity channels.

In its Europe and Central Asia regional economic update, the World Bank stated that Serbia's 2021 GDP growth was estimated at 7.4%, projecting the 2022 and 2023 growth to be 3.2% and 2.7%, respectively. This is a 1.3 percentage point decrease from the January forecast for 2022 and 2023.

In January, the World Bank projected a 4.1% growth for the Western Balkans in 2022. "Over the medium term, the subregion is expected to benefit from the European Union’s recently adopted Economic and Investment Plan for the Western Balkans, which will mobilize funding to support competitiveness and inclusive growth, as well as the green and digital transitions," the report states.

"Although the share of economic output directly tied to Russia and Ukraine is relatively small for the Western Balkans as a whole, a few countries remain vulnerable to shocks from Russia, including Montenegro, for 11 pct of its FDI, and Serbia, for 5 pct of its exports and 5.4 pct of its imports in 2021. However, the more acute risks for the Western Balkans stem from possible disruptions in the supply of natural gas and oil. The subregion receives 67 pct of its natural gas imports from Russia, with Bosnia and Herzegovina, North Macedonia (via Bulgarian pipeline), and Serbia completely reliant on Russia for their natural gas supply," the report also says.

The energy security of the EU neighbouring countries and partners is of great importance for the Union.
Last week the EU adopted sanction exemptions to energy trading for the Western Balkans in order to ensure the energy supply remains uninterrupted.

The exemption means that Serbia’s oil imports by the National Oil Company NIS (56% owned by Gazprom) through the Adriatic pipeline will remain uninterrupted.


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