Serbia will remain in recession until the end of 2013, stated economists of the Belgrade Banking Academy (BBA) and the Institute of Economic Sciences.

Economic growth in the first quarter of the year was by 1.3 percent lower than in the same period in 2011 and since the drop was considerable, BBA believes that Serbia would remain in recession in the next 1.5 year, BBA Dean Hasan Hanic stated during the presentation of the bulletin 'Macroeconomic Forecast and Analysis' issued by the institution.

The observation is based on the data that Serbia's GDP in the first quarter of the year dropped by 0.5 percent relative to the last quarter of 2011. The situation in the region and the world, including the long crisis in the Eurozone and the drop of the import demand, will affect the country's export, and in the next 1.5 year economic activities should not increase nor can the problem of unemployment be resolved, Hanic said.

He recalled that Serbia recorded GDP growth worth 1.6 percent in 2011, while the same figure totalled around 1 percent in 2010 and in 2009, the GDP growth rate dropped by 3.5 percent. Hanic underscored that another cause for concern lies in the accelerated drop of the dinar, as it declined against the euro by 10 percent since the beginning of the year.

The economist believes that the drop of the dinar came as a result of the uncertainties surrounding the elections and the proportion of offer and demand of foreign exchange. The offer is sparse and these are mostly revenues based on export of products and services and direct foreign investments which were lacking in the previous period, he underscored.

Hanic said that he came up with the calculation according to which the National Bank of Serbia made average daily interventions of over EUR 27 million over the past 20 days. He stated that the dinar can stabilise and that new short-term oscillations can be prevented unless there is a systemic reason that affects the drop of the dinar.

However, this systemic reason exists and it is embodied in the foreign exchange deficit and weak economic activity in the country. According to the assessment by BBA Vice Dean Zoran Grubisic, there is some possibility that the drop of the local currency is also caused by the country's foreign exchange dues maturing this year.

Although the insight into the repayment period of the obligations is not completely clear, assessments show that a considerable part of the dues matures this year, that is, some 3.5 billion, he noted and explained that this all leads to an increased demand for foreign exchange and pressures on the dinar.