Boston, MA -- (SBWIRE) -- 06/17/2013 -- Ognjenovicn in September 2012 and forwarding of the case to the prosecutor's office for organised crime later last year.

BMI Economic View: The Serbian economy was undermined from several directions in 2012. The eurozone crisis weighed on exports and investment inflows, while two bouts of extreme weather hit both industrial and agricultural production. The new government's fiscal consolidation drive also hit domestic demand in the second half of the year. Real GDP contracted by 2.5% year-on-year (y-o-y) in Q3, having already fallen by 0.6% in the previous quarter. We expect Serbia to enjoy a modest recovery over the coming year, forecasting real GDP growth to accelerate from -1.9% in 2012 to 1.9% in 2013. This will be partly due to base effects after several bouts of extreme weather hit agricultural and industrial output, but also increased exports and remittance inflows.

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BMI Political View: Despite a shaky start, Serbia's nationalist Progressive Party (SNS) has enjoyed a moderately successful first six months in power, with some progress in stabilising the fiscal accounts and improving relations with Kosovo. We hold to our initial view that EU membership and a rapprochement with the IMF will be key objectives for the government, anchoring policy.

- However, remittance inflows, which have historically accounted for more than 10% of GDP, will strengthen in 2013 as the eurozone begins its gradual recovery. Household confidence more broadly is likely to pick up in the second half of the year, and we expect increased household income to be spent rather than saved given that household savings have actually increased significantly over the last few years.

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