The Serbia Retail Report examines the long-term potential of the local consumer market, but flags shortterm concerns about the impact on Serbia's economic outlook of delayed growth in the energy and infrastructure industries.
The report examines how best to maximise returns in the Serbian retail market while minimising investment risk, and explores the impact of the eurozone crisis and declining remittances on the Serbian consumer and on the ability of producers and exporters to realise returns in the short term.
The report also analyses the growth and risk management strategies being employed by the leading players in the Serbian retail sector, as they seek to maximise the growth opportunities offered by the local market. Serbian per capita consumer spending is forecast to rise by a modest 13.4% between 2013 and 2017, compared with a regional growth average of 39%. The country comes first out of 10 in BMI's Central and Eastern Europe (CEE) Retail Risk/Reward Ratings, although its Risk rating is comparatively low. Among all retail categories, consumer electronics will be the outperformer through to 2017 in growth terms, with sales rising 28.4% between 2013 and 2017 to US$1.58bn.
The consumer electronics sector is a relatively large, underdeveloped market offering growth potential in key digital products groups such as computers (12% penetration), notebook computers, 3G handsets and LCD TV sets. In the competitive arena, BMI sees upside potential in the fact that on March 1 2012 the EU awarded Serbia candidate status. Although Serbia is unlikely to join the EU before 2018, the accession process itself will provide the government with a policy anchor and development funds. We also expect investors to be enticed by the prospect of eventual access to the single market.
Over the last quarter, BMI has revised the following forecasts/views:
- The Serbian economy posted real GDP growth of 2.1% year-on-year in Q113, confirming our expectation that the economy is poised for a modest recovery this year. We continue to forecast full-year growth of 1.3%, which will increase to 3.4% in 2014, driven mainly by a pick-up in fixed investment and private consumption, which will offset the negative contribution to growth from government consumption.
- Household spending fell by 1.1% in Q113, as record high unemployment and double-digit inflation in 2012 continued to weaken consumer confidence into the beginning of 2013. Unemployment, at 24.1% in April, will remain an impediment to household spending, as will declining real net wages, at 1.2% in April. Despite this, we see a number of positive factors that signal a modest turnaround for this component of GDP, underscoring our forecast of full-year growth of 1.3% in 2013.