March 29, 2013 / 1:50 PM / 5 years ago

UPDATE 2-Serbian economy dips in 2012, clouds may lift in 2013

* GDP falls 1.7 percent in 2012, 0.3 pct in fourth quarter

* Serb government expects 2 pct growth in 2013

* Seeks to revive economy for IMF talks, EU entry (Adds foreign trade, industrial production data)

By Aleksandar Vasovic

BELGRADE, March 29 (Reuters) - Serbia’s economy shrank 1.7 percent last year, statistics office data showed on Friday, hit by a drought that slashed its agricultural exports and by the debt crisis in the euro zone, its main trade partner.

The European Union candidate state is targeting growth of 2 percent this year after slipping into recession in 2012. The economy grew 1.6 percent in 2011.

Trade activity in the country picked up early in 2013. Exports rose 42 percent year-on-year in February to 742.8 million euros ($953.8 million) and imports grew 4.7 percent to 1.13 billion euros, the statistics office also said.

In 2013 the Serbian government expects a 25 percent rise in exports, pinning its hopes partly on a joint venture with Italy’s carmaker Fiat as well as on agriculture and the oil and gas industry.

Agriculture accounted for 20 percent of Serbia’s exports in 2012, but the country’s farms lack modern irrigation and are prone to floods and droughts.

The 2012 slump was marginally less acute than the government expected, having forecast a contraction of around 1.8-1.9 percent.

That in part reflected efforts to revive the economy by the Socialist-nationalist government that took power last year, said Miladin Kovacevic, deputy head of the Statistics Office.

The government is also hoping to resume talks with the International Monetary Fund in May on a precautionary loan. The lender suspended a 1 billion euro ($1.3 billion) deal last year due to overspending and debt.

“The new government revised its budget, initiated fiscal consolidation, borrowed to make up for the deficit and improved liquidity,” Kovacevic said, adding that industrial production halted its slide in the fourth quarter.

Industrial output rose 13.1 percent year-on-year in February, but the rise is linked to a very cold 2012 winter that halted most production, the office said.

“(Economic) growth in 2013 can be expected if industrial production continues to rise mildly or at least holds steady, if agriculture does not face a drought like the one in 2012 and if we do not see a drop in demand,” Kovacevic said.

Public debt rose to about 60 percent of gross domestic product last year and the government is hoping it will peak at 65 percent.

Belgrade also wants to reduce the current account gap, to about 8.5 percent of GDP from about 10.7 percent last year.

$1 = 0.7788 euros Reporting by Aleksandar Vasovic; Editing by John Stonestreet

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