Dinar savings are still more profitable than foreign currency ones, News
Last year, keeping money in local currency increased by about 12 percent and at the end of December, 104.2 billion dinars were deposited, which is the new highest amount.
Household savings continued to grow during 2021, despite the prolonged pandemic followed by the escalation of the global energy crisis and inflationary pressures, and savings in domestic currency proved to be more profitable than foreign currency in such circumstances, the National Bank of Serbia (NBS) said.
In 2021, dinar savings increased by about 12 percent and amounted to 104.2 billion dinars at the end of December, which is its new highest level. In the past nine years, dinar savings have increased almost six times (growth of 86.3 billion). Half of the total growth (43.1 billion) was achieved in the last three years thanks to maintained macroeconomic stability, which is a precondition for gaining and maintaining citizens’ trust in the domestic currency. Foreign currency savings in the same period are also growing, although relatively (percentage) somewhat more moderate (59.2 percent) than dinar savings, from 8.3 billion euros at the end of 2012 to 12.7 billion euros at the end of 2021.
The regular semi-annual analysis of the profitability of savings for the period from December 2012 to December 2021 confirmed that it is more profitable to save in domestic currency. The higher profitability of dinar savings was primarily influenced by the regulated macroeconomic framework – monetary and fiscal stability in the long run, relatively stable dinar exchange rate, high level of foreign exchange reserves, problem loans at low level, moderate level of public debt. Interest rates on savings in dinars are relatively higher than on savings in euros, and the tax treatment of savings in domestic currency is more favorable, because interest on dinar savings is not taxed, and interest on savings in euros is taxed at a rate of 15 percent. In addition, higher cost-effectiveness was influenced by timely and optimal monetary and fiscal policy measures to mitigate the effects of the pandemic crisis.
The results of the analysis of the profitability of one-year term savings and renewed in a period of nine years confirmed that a citizen who saved in dinars on a deposit of 100,000 dinars at the end of the term period in December 2021 would receive nearly 36,000 dinars (about 300 euros) more than a saver who in the same period deposited the equivalent of the same amount on foreign currency savings in euros.
Savings in the domestic currency proved to be more profitable when depositing for one year in as many as 98 percent of the observed annual subperiods in the last nine years. A dinar saver who has been saving in dinars on a deposit of 100,000 dinars since December 2020 would receive about 1,300 dinars (11 euros) more in December 2021 than a saver who would deposit the equivalent of the same amount in euros in the same period.
When it comes to deposits with a term of three months, savings in dinars were more profitable than savings in euros in 88 percent of three-month subperiods, and when saving for two years, dinar savings were more profitable in all two-year subperiods. Therefore, regardless of the time of term savings, whether it is short-term or long-term, in the previous nine years it was more profitable to save in domestic currency, according to the central bank.
The aggravation of the global crisis caused by the pandemic under the influence of disruptions in supply chains and rising energy prices has been reflected in the emergence of global inflationary pressures. In such circumstances, the NBS maintained the relative stability of the dinar exchange rate against the euro, which is a strong factor in price stability. They state that they reacted to the increased inflationary pressures with adequate monetary policy measures – by gradually increasing the weighted average interest rate on repo auctions and the percentage of withdrawn dinar liquidity surpluses through these auctions. Foreign exchange reserves have increased and reached 16.5 billion euros at the end of last year, with an increase in gold reserves to a record 37.3 tons. The share of non-performing loans in total loans has been lowered to the lowest level since the beginning of the implementation of the Strategy for resolving non-performing loans (since 2015) and amounted to 3.4 percent at the end of the year, Politika reports.
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