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Declining inflation in Serbia: Implications and outlook explained by National Bank researcher

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Recent data reveals a substantial drop in inflation in Serbia, from 16.2% in March 2023 to 6.4% in January this year. Lazar Radivojević, a researcher at the National Bank of Serbia, sheds light on the factors contributing to this slowdown, emphasizing its effects on consumer prices and daily life.

Radivojević clarifies that lower inflation doesn’t signify an overall decrease in consumer prices but rather a slower rate of growth compared to 2022 and the first quarter of 2023. He notes that certain products and services have experienced reduced prices, emphasizing that the deceleration in inflation leads to less frequent price changes and offers retailers more opportunities for customer promotions.

The most notable slowdown in growth, according to Radivojević, occurred in the food price category, which holds significant importance in the consumer basket. Food prices, which surged around 25% in March 2023, saw a substantial reduction to 7.2% in January 2024. Radivojević highlights the easing of inflationary pressures, especially in essential products like vegetables and processed foods.

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The researcher points out that the primary benefit of lower inflation is seen in increased disposable income and improved living standards due to higher real wage growth. Average salaries have been growing faster than inflation since the middle of the previous year, positively impacting the population’s real income and contributing to increased retail trade volume.

From an economic perspective, low and stable inflation provides business certainty, supports investment planning, and contributes to new investments, employment growth, and higher incomes. Additionally, lower inflation improves financial and credit conditions, further boosting disposable income for consumption and investments.

Looking ahead, Radivojević notes that the National Bank of Serbia expects a continued slowdown in inflation, with a return to the target range in the middle of the year. By year-end, it is anticipated to approach the central value of the target (3%) and maintain that level in the following year. Overall, citizens can anticipate more positive effects of lower inflation in the coming months.

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