May 19, 2017 Business

Drop in Electricity Production May Stifle Economic Growth

The decline in electricity production in early 2017 will likely impact economic growth, according to experts who warn the state energy company is in urgent need of reform.

Energy Minister Aleksandar Antić told Tanjug news agency on May 3rd, that EPS will invest 250 million euros in Kolubara. Photo: Beta

Stevan Veljovic

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The government’s predicted economic growth rate of three per cent for 2017 has already been called into question, due to an unexpected drop in electricity production.

Electricity production dropped by 14.5 per cent in the first quarter of the year, with the sharpest decline in production – 22.9 per cent – recorded in March, according to the state Office of Statistics.

They recorded a meagre one per cent growth of the Serbian economy, expressed as GDP, in the first quarter of 2017. By comparison, throughout 2016 GDP never dipped below two per cent, which indicates this year’s growth rate might be lower than projected.

The production and distribution of energy is one of the key components of industrial production, along with agriculture, manufacturing, mining and other sectors, all contribute significantly to the country’s overall economic growth rate.

Lower economic growth has been attributed to the negative impact of lower electricity production. However, a variety of factors could be responsible. Consumers have not yet been affected by either by power outages or rising prices.

While acknowledging that overall economic growth will also be determined by how well agriculture and other industrial sectors perform, experts are warning the drop in electricity production will negatively impact GDP.

Milojko Arsić, an economics professor at Belgrade University, told BIRN that the decline in electricity production could see the 2017 GDP growth rate, containing growth rates in all four quarters of the year, drop by between 0.2 and 0.3 per cent.

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