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Home/News/Loans to recover the economy of Serbia from the virus will be cheaper

Loans to recover the economy of Serbia from the virus will be cheaper

The National Bank no longer has options for assistance, unlike the state, which has subsidies, deferred payments or discharge.
The National Bank of Serbia (NBS) lowered its benchmark interest rate by 50 basis points to 1.75 percent, effectively sending the message that money to recover the economy from the effects of the corona virus would be cheaper. The National Bank of Serbia has undoubtedly followed the policies of major central banks such as the US Fed and the European Central Bank, which have already done so.
Is that enough and does our main bank have any other opportunities to help the economy? Bosko Zivkovic, a professor at the Faculty of Economics in Belgrade, says it’s a good measure, but he’s not sure how much it can help. Theoretically, the National Bank may reduce the required foreign exchange reserves. However, as she had previously reduced them, she reached the limit when it was no longer possible.
– The extent of the decline in economic activity cannot be estimated yet. This crisis is different from others, and not just because of the corona virus. The markets have been warmed before, due to the excessive rise in stock prices caused by many factors, but not by economic growth. Now that balloon is blowing out – says Zivkovic.
Goran Radosavljevic, a professor at the Faculty of Economics, Finance and Administration, says that the National Bank’s move to cut the main interest rate is good, but believes that it will not be able to over-mitigate the effects of the virus on economic activity.
– The idea is to reduce the dinar loans and make the companies choose them for less risk. We will see how the banks will react and whether they will reduce the price of the loans, because they are not made only by the base interest rate. In addition, the question is the demand for them, whether the companies will borrow – says Radosavljevic.
The National Bank, he says, could do nothing more, but the government, which in its view, should weigh precisely who should give the money, because it is not the point of the money to spend alone. The key to assistance is in the hands of the state and it needs to be seen to whom and when financial relief or direct subsidies can be given or deferred payment of obligations, taxes.
– If the economy does not work, there will be no one to pay the tax. There will also be problems with the liquidity of the company. Also, demand is decreasing. For now, we know that tourism and transportation are most affected – says Radosavljevic.
The National Bank said that by reducing reference interest rates in a context of low inflationary pressures, it would further support credit and economic growth. Developments in the global financial market in recent days have been strongly influenced by the spread of coronary virus – world stock markets have been declining and prices of safe forms of investment, such as gold or sovereign securities, have been rising. Increased uncertainty poses a risk to global economic growth, causing the relevant global institutions to reduce global economic growth forecasts for the current year.
In these circumstances, the world’s leading central banks (the US Federal Reserve, the Bank of England, the Bank of Canada and the Bank of Australia) have reduced their basic interest rates in recent days and announced that they are ready to take all available measures to prevent the negative effects of the spread of coronary virus on global economic growth. Similar activities in monetary policy relaxation are expected from other central banks (primarily the European Central Bank). This should contribute to reducing uncertainty in the international financial market and maintaining favorable financing conditions in the coming period.
– The decision to continue easing monetary policy was made by the Executive Board, taking into account domestic factors, increased risks from the international environment towards lower global growth and the assessment that inflationary pressures on this basis were further mitigated compared to the February medium-term projection. On a daily basis, the National Bank closely monitors developments in the international market and assesses their possible impact on the domestic economy. Accordingly, we are ready to react in a timely manner to all available instruments in a timely manner in order to minimize the possible negative impact of these global trends on the domestic economy.
Full coordination of monetary and fiscal policies will be continued, which will help preserve the achieved macroeconomic stability and reduce the negative effects of events in the international environment, the NBS said, Politika reports.