The pandemic is an unprecedented shock, but before the pandemic we worked in such a way that we prepared Serbia to be able to record dynamic and sustainable growth on a much stronger basis, as well as to face different types of shocks, said the governor of the National Bank of Serbia Jorgovanka Tabakovic.
In an interview for the Biznis.rs portal, Tabakovic explained why Serbia found itself in the group of countries that are predicted to have the highest nominal growth in the world next year.
She said that the complete economic transformation of the country was carried out during eight years, which can be seen through low and stable inflation, relatively stable dinar exchange rate, successful fiscal consolidation, opening of factories, strong growth of employment and exports.
She reminded that the growth rates were more than four percent in 2018 and 2019, with a strong contribution of investments – domestic and foreign.
“Let me not forget the strong financial sector, which we have strengthened over the past eight years so that there can be real and full support for the real sector, because only together can they last. We cannot do without each other,” Tabakovic said.
She pointed out that during the pandemic, Serbia stood out with an extensive and timely package of support measures.
“Because of everything we have done to strengthen our economy, we have been able to adopt a comprehensive and comprehensive package of economic measures worth close to 13 percent of GDP, and we have adopted it as soon as possible. The scope and timeliness of the measures were key to preventing a decline in business and consumer confidence, thus preventing the spillover of the negative effects of the pandemic on the labor market and production capacity,” she said.
She added that during the crisis, the NBS was also the “first refuge” because, through numerous measures that we adopted almost every month, it supported citizens, the economy and the state to overcome the crisis more easily in financial terms.
“Thus, we have preserved the necessary liquidity of all sectors, good access to financial sources of funds, as well as even more favorable financial conditions,” said the NBS governor.
Tabakovic assessed that Serbia has already reached or exceeded the pre-crisis level in many areas of the economy, and stated that it is about industry, export of goods, retail trade, as well as the number of employees.
“The average net salary increased by 9.4 percent in the whole of 2020. The total formal employment in February this year was higher by 59 thousand people compared to February last year, while the growth was driven by the growth of employment in the private sector by 58 thousands of people,” she said.
She stated that the reason is the diversification of industrial production, and thus exports, which was done systematically in Serbia.
“This is exactly what helped us to affect a smaller part of our industry during the pandemic, and to maintain our presence in other markets as well,” she said.
Tabakovic stated that Serbia also had an increase in exports to countries outside the EC, such as the countries of Central Europe, China and the United States, during the “pandemic” year.
“The best example is the automotive industry, where Serbia has the most diverse range of products produced in this area – from tires, batteries, conductors, to the most sophisticated products such as microchips and electric motors from about 500 million euros to two billion euros,” she said.
As she pointed out, infrastructure projects continued to be realized in Serbia during the pandemic, and the share of state capital investments in GDP increased to 5.4 percent last year, from 4.9 percent in 2019.
“It is, by the way, a recommendation given to countries in normal conditions – increase capital investments. We worked like that in Serbia during the pandemic, and their share will continue to grow this year to more than six percent of GDP,” said Tabakovic.
She assessed that responsible behavior continued in Serbia, because with the provision of a huge package of measures, the share of public debt in GDP was preserved at a level that does not exceed 60 percent of GDP.
Tabakovic said that foreign exchange reserves were not only preserved but were additionally strengthened in the crisis year 2020, by 113.2 million euros, and their growth continued this year by 783.9 million euros, so that at the end of March reached 14.3 billion euros.
“That means that we continued to act responsibly, because we know that we should live even when the pandemic passes,” she said.
She added that in the sector of information and communication technologies (ICT), export growth was achieved in 2020 as well.
“But it is not the only one. Agricultural exports, which have almost doubled since 2012 – from about 750 million euros to almost 1.3 billion euros in 2020. Agriculture is exactly the component that made the necessary difference and helped GDP growth,” she said.
She said that in the years before the pandemic, domestic tourism was rapidly developing, among other things, through a voucher program.
“During the summer months of last year, domestic tourism made up for a large part of the absence of foreign tourists, and we enjoyed the beauties of our country,” Tabakovic pointed out.
As she stated, all these are the reasons why Serbia is in the group of countries whose credit rating was either maintained or increased during the pandemic, which is really a rarity.
Increased foreign exchange reserves
At the end of March, the gross foreign exchange reserves of the National Bank of Serbia amounted to 14.275 billion euros, which is 852.8 million more than in February, the National Bank announced.
Net foreign exchange reserves at the end of March amounted to 11.871 billion euros and increased by 879.2 million compared to the end of the previous month.
The increase in gross foreign exchange reserves in March is primarily the result of the inflow based on the issuance of a twelve-year Eurobond of Serbia in euros, and then donations.
The realized inflows were more than enough to cover outflows based on net government deleveraging on foreign currency loans and securities in the amount of 162.6 million euros, activities of the National Bank of Serbia on the domestic foreign exchange market in the amount of 113 million euros and outflows on other bases in the amount of 88 million euros, it is stated in the announcement.
The increase in foreign exchange reserves in March was additionally influenced by the positive effect of market factors in the net amount of 157.4 million euros.
The volume of realized foreign exchange trade on the interbank foreign exchange market in March amounted to 468 million euros and was 13 million euros less than in the previous month, and in the first three months of this year, 1.525 billion euros were realized in interbank trade.
In March, as well as since the beginning of this year, the value of the dinar against the euro is almost unchanged. The National Bank of Serbia bought and sold the same amount of foreign currency on the interbank foreign exchange market in March – 45 million euros each.
Since the beginning of the year, the National Bank of Serbia has sold 50 million euros net in order to maintain relative stability on the foreign exchange market, RTV reports.
