“For a full seven years, inflation in Serbia has been two percent, and this is a success that has materialized through what is called Serbia one step away from the investment rating,” the governor of the National Bank of Serbia, Jorgovanka Tabakovic says, adding that Serbia, which borrowed in the world at an interest rate of 7.25 percent. “Interest rates, which were 18 percent, on newly approved dinar loans, are now 6.5 percent.”
Tabakovic pointed out that inflation in Serbia has been 5.7 percent in the last year. Inflation, she says, averaged nine percent from 2008 to 2012, and the end of 2013 was greeted with inflation of 2.2 percent, and from 2014 to 2020, annual inflation was two percent.
“The predominant factor, almost 90 percent of this year’s inflation, is an external factor. These are prices that come from the environment, prices of energy, oil, gas, energy crisis, prices of raw materials on the stock exchanges, especially unprocessed food,” Tabakovic explains.
According to her, the prices of corn, soybeans and sunflowers are all prices from the world that had an impact on our prices.
She adds that Serbia has already made three billion euros of foreign investments this year, and the pre-pandemic year 2019 was a record with 3.8 billion euros, and that those who continue to come to Serbia are obliged to open factories and jobs.
According to the governor, the National Bank will influence everything that monetary policy can affect, and that is core inflation.
“Core inflation is two percent all the time and what drives the economy is trust and inflation expectations. Serbia and the NBS are one of the few that have not yet raised the reference interest rate and we still have room not to raise it and thus not increase loan installments and we are hampering the growth that is necessary for the country,” the governor points out.
She adds that the monetary framework has been working for two months to tighten monetary conditions in terms of reducing liquidity, but through the executive rate.
“The final repo rate on one-week securities at auctions was 0.11 percent. There are auctions on Wednesday and it is 0.27 today, and we have room up to 1 percent not to tighten monetary policy,” Tabakovic emphasizes.
She points out that they manage to preserve the real value of citizens’ incomes.
“In the first seven months, wages grew by 8.5 percent. Our estimate is that by the end of the year, average inflation will be 3.7 percent, GDP must grow more than wages and pensions grow, inflation from around the world will be partly spilled over in our country, but it must not be spilled over from the price of energy, through monetary policy, to other prices,” explains Jorgovanka Tabakovic.
She adds that the fact is that all agricultural products, food and energy have become more expensive. It is predicted that in the middle of next year, inflation will return to 3 percent plus or minus 1.5.
According to Jorgovanka Tabaković, the success that Serbia has achieved all these years, significantly changing that house of Serbia into this house today, was achieved thanks to coordinated measures of monetary and fiscal policy.
“The credit for what is called a stable dinar, a relatively stable euro exchange rate and stability in Serbia is not just my result and I do not appropriate it. Without the support of my team and the coordinated policy of the Serbian government and the support of the president who started it when he was president of the government, that would not be possible,” the NBS governor stressed.
The NBS bought 1.5 billion euros
Since April this year, when inflation started to rise, the NBS has bought one billion and 555 million euros.
“No company, which has its headquarters abroad and operates in Serbia, has had a restriction in making a profit, ie buying foreign currency on the interbank market and paying profits to its founders,” Governor Tabakovic points out.
Total gold reserves 37 tons
The National Bank of Serbia returned a ton of gold from Basel, which was physically located in London.
“For the first time, Serbia bought 12 tons of gold abroad. First, domestic gold is bought and the most popular is the one bought for dinars. That means that the foreign exchange reserves in gold have been increased with their own dinars,” the governor explains.
According to her, 10 tons of gold were bought in Bor.
“Since 2018, we have an increased offer and we are buying all the quantities that Zijin offers to the National Bank. The total gold reserves are 37 tons. Out of 12 tons bought abroad, we bought nine tons in 2019 and three tons in 2020,” said Governor Jorgovanka Tabakovic, B92 reports.
