In making such a decision, the Executive Board primarily had in mind that the effects of previously adopted monetary and fiscal policy measures can be expected in the coming period, as well as that the third package of measures to help the economy and citizens has been announced. This means that monetary and fiscal policy measures will continue to have a favorable effect on the conditions of financing the economy and citizens and the growth of their disposable income.
The Executive Board pointed out that the results of the domestic economy have been favorable since the beginning of the year, even in the conditions of a globally worsened epidemiological situation and stricter health measures, as indicated by available monthly indicators of activity, foreign trade and the labor market. The growth of production in the processing industry is especially emphasized, which was contributed by the activation of new production capacities thanks to investments from the previous period, the measures taken by monetary and fiscal policy, as well as the gradual recovery of external demand. The processing industry, in addition to agriculture, is leading the further growth of our exports, which has remained geographically and productively distributed as a result of the strong inflow of foreign direct investments in Serbia in previous years, mainly in tradable sectors. Retail trade turnover has recorded positive trends since May last year, and with the successful continuation of the vaccination process, recovery is expected in other service sectors, which are still largely affected by the current pandemic. This should result in the coming months in reaching the pre-crisis level of the gross domestic product, and then in the continuation of its accelerated growth, to which the newly announced package of economic aid measures will contribute.
For the eighth year in a row, and in the conditions of a pandemic, the National Bank of Serbia continues to fulfill its basic goal – ensuring low and stable inflation. In line with the expectations of the National Bank of Serbia, inflation returned to the target in March and amounted to 1.8% year on year. Core inflation was the same, which did not change compared to February. The Executive Board expects that inflation will be low and stable in the coming period, within the lower half of the target range. An important factor in low and stable inflation was and remains the relative stability of the exchange rate, as well as the anchoring of inflation expectations of the financial sector and the economy, which confirm the credibility of monetary policy.
The Executive Board had in mind that the state of the global economy and the prospects for its growth are still affected by the pandemic, but that the fact that the projections are being revised upwards is encouraging. In early April, the IMF, for the second time since the beginning of the year, increased the growth projection of the world economy, expecting the effects of additional fiscal measures taken by the world’s largest economies, as well as the stimulus that the vaccination process will give to global growth in the second half. Stronger growth of the euro zone is also expected, as well as Germany and Italy, our most important trade partners, which will have a positive impact on the exports of our economy. The speed of recovery of the world economy will determine the movements on the international financial market and capital flows towards emerging countries, and thus Serbia, which increases the importance of a prudent approach in conducting monetary policy. In addition, caution is needed due to the uncertainty in the world commodity market, primarily due to the upward trend in the prices of oil, primary agricultural products and food, which has been going on for some time.
The Executive Board emphasizes that the priority of monetary policy will continue to be ensuring price and financial stability, with the support of the fastest growth of our economy and employment, further growth of the export sector, as well as a favorable investment environment. The National Bank of Serbia will continue to closely monitor the developments and the impact of key factors from the domestic and international environment on inflation, financial stability and the speed of economic recovery, and to adjust its measures accordingly in the interest of our economy and citizens, Kamatica reports.
