Current high inflation in Serbia is temporary

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“High April year-on-year inflation of 2.8 percent was caused by temporary factors, and according to the projection of the National Bank of Serbia (NBS), inflation in our country will remain under control in the coming years and will be within the allowed deviation from the target,” says Jorgovanka Tabakovic, Governor of the National Bank of Serbia.
In a conversation with Tanjug, she explains that now, under the influence of coming out of the pandemic and the growth of prices of primary products on the world market, inflation in most countries, including Serbia, is somewhat higher than last year.
“Temporary factors influencing such inflation are primarily the world oil price, which, after the historically lowest level recorded during this year’s pandemic, is recovering and has reached pre-crisis levels. This spills over into rising oil prices in all countries, including in Serbia,” Tabakovic points out.
She adds that in addition to the price of oil, the temporary factor is the growth of inflation and the growth of food prices.
It is primarily a consequence of higher prices of primary agricultural products on the world market and rising prices of vegetables on the domestic market in April due to cold weather, as well as a low base from the same period last year.
“The cessation of these factors and the exit of this year’s rise in food and oil derivatives from the year-on-year calculation of inflation will contribute to inflation in the lower part of the target range of three plus or minus 1.5 percent from the second quarter of next year,” said NBS Governor Jorgovanka Tabakovic.
When asked how much personal consumption contributes to economic growth and what impact state aid measures have on citizens, she explains that this consumption is one of the pillars of economic growth in all countries.
This is because, according to her, the only economic growth that benefits all layers of society is sustainable and desirable in the long run.
She points out, however, that the essence is not whether personal consumption is growing, but at what rate.
“In the medium and long term, personal consumption needs to grow somewhat more slowly than total gross domestic product (GDP), which gradually reduces its share in GDP, while opening space for investment and net export growth. This is the most desirable model of economic growth and according to it, the Serbian economy has been growing since 2015,” Tabakovic told Tanjug.
When it comes to the impact of one-time state benefits on personal consumption, she points out that this connection certainly exists, because these measures contribute to the growth of disposable income, and thus to the growth of consumption.
Tabakovic points out that thanks to state benefits during the last year, among other things, a larger decline in personal consumption and total GDP was prevented.
“Apart from the fact that state benefits increased the income of the population, the package of assistance to citizens and the economy contributed to the preservation of production capacities and jobs and thus prevented a greater decline in business and consumer confidence,” she explains.
She adds that according to the NBS estimate, the fall in GDP in Serbia last year, instead of one percent, would have been more than six percent if there had not been a package of monetary and fiscal measures.
Also, the recovery, instead of a few quarters, would take several years, which, according to Tabakovic, happened during the previous crisis, when the level of GDP from 2008 was reached only four years later.
According to her, real GDP growth of six percent and more is expected this year, and in addition to the growth of fixed investments, the biggest contribution should be made by the growth of personal consumption, which is estimated at about three percent, Tanjug reports.