Jorgovanka Tabaković: Overview of recent monetary and macroeconomic trends in Serbia

Introductory speech by Dr Jorgovanka Tabaković, Governor of the National Bank of Serbia, at the presentation of the Inflation Report - February 2017, Belgrade, 22 February 2017.

Central bank speech  | 
23 February 2017

Ladies and gentlemen,

Welcome to the presentation of the February Inflation Report.

I would like to begin just as I will conclude - by summing up last year. Namely, 2016 ended with yearon-year inflation of 1.6%, the fiscal deficit of 1.4%, the current account deficit of 4%, the NPL level of 17%, foreign direct investment of EUR 1.9 bln and the customary inflow of remittances of 2.6 bln. Why am I starting off like this? It is because the fiscal deficit of 1.4% was lowered by 2.3 percentage points relative to the year before, the current account deficit fell from 4.7% to 4%, and the level of NPLs fell by 4.6 percentage points to 17% compared to the end of the last year - these being preliminary results. All these are reasons which underpin our decision to start this year with the new target of 3.0±1.5%. The results from 2016 justify our decision to lower that target. I expect this will be the best confirmation that Serbia ranks among the countries running low and stable inflation.

Inflation is expected to move within the target tolerance band as of early this year, on account of the effects of past monetary policy easing, the recovery of domestic demand and global oil prices, and a gradual rise in inflation abroad. The key risks to the projected inflation path are related primarily to the international environment, notably the diverging policies of the leading central banks - the Federal Reserve and the European Central Bank, as well as uncertainties associated with movements in oil prices. The Federal Reserve raised its rate in December and it became probable that the pace of rate hikes would be faster than expected. On the other hand, the European Central Bank's decision to extend its quantitative easing programme until at least end-2017 signals the continuation of the Bank's monetary accommodation, expected to moderate adverse effects of the Fed's policy.