Governor Jorgovanka Tabaković has met today in Belgrade with Deputy Managing Director at the IMF Tao Zhang and informed him that the NBS has raised Serbia’s growth forecast for this year. Governor Tabaković reminded that the projection was raised from 3.5% to at least 3.6%, with realistic chances that growth may be even higher, as particularly suggested by trends in the construction sector.
The Governor reiterated that an equally important fact is the changed growth model – the growth which used to be based on unsustainable consumption is led today by investment, exports and a sustainable rise in consumption, the National Bank of Serbia (NBS) says on its website.
The share of fixed investment in GDP is expected to exceed 23% this year and 25% in the medium run, the governor said.
– We are witnesses to the success you are achieving. The central bank enjoys confidence and has a great influence on the Serbian economy – Zhang said.
During the meeting with the high IMF officials, Governor Tabaković indicated that by pursuing the primary objective – low and stable inflation, and in an environment of low inflationary pressures, the NBS continued to conduct adequate monetary policy, by cutting the key policy rate to 2.25% in November.
Including this cut, the key policy rate has been lowered three times this year, by total 75 basis points. This lends further support to vibrant growth in lending activity, which is accelerating particularly in the corporate sector, and is conducive to growth in private investment as an important growth factor in Serbia over the past years.
The high IMF officials also assessed that keeping inflation at a low level, at 1.9% on average in the year so far, is crucial for anchored inflation expectations and trust in monetary policy.
The confidence in the policy and achieved stability is also borne out by the fact that dinar savings are today four and a half times higher than seven years ago.
– Low inflation and a stable financial sector provide significant support to sound public finances – underscored Zhang.
The governor also informed Zhang that in October the NBS bought gold in the international market for the first time, increasing the share of gold in FX reserves from 7% to around 10%.
Doing so, the NBS once again demonstrated that even in investing FX reserves it upholds the principle of diversification, as the best buffer against external risks.