Serbia: An improving balance of payments situation?
Overview:
The current account deficit in Serbia was about 7% of GDP in 2010, little changed from the 2009 outcome. This is a significant improvement on the 18% of GDP deficit seen in 2008 but still a large deficit in its own right. What’s more, the capital account recorded a much smaller surplus in 2010 than in 2009. This means that the balance of payments (BoP) recorded a deficit last year rather than the surplus seen the year before. There have been signs, though, in recent months that the BoP situation might be improving. The dinar has stabilised and even strengthened against the Euro. However, this likely reflects larger portfolio inflows due to high interest rates in Serbia given that the trade deficit is now rising. An increase in capital inflows is welcome but does not deflect from the need to strengthen the export base.