Tabakovic:End-year inflation should be two times lower than at beginning of 2023

MT KOPAONIK - February macroeconomic projections in Serbia indicate improvement in all segments and end-year inflation should be two times lower than at the beginning of 2023, National Bank of Serbia (NBS) Governor Jorgovanka Tabakovic said on Monday.

Speaking at the 30th Kopaonik Business Forum, Tabakovic said peace and stability should not be taken lightly and that Serbia had demonstrated it had both the desire and the know-how to boost the resilience of its economy.

She said inflation in many countries was now higher than it had been in decades and that Serbian inflation in 2022 had mostly been driven by energy and fuel prices.

She noted that Serbia's reaction had not come too late.

"On the contrary, we were among the first to start with gradual monetary policy tightening, already in October 2021. We did this first by increasing the executive repo rate, a model enabled bychanges to the monetary framework from December 2012. At the time, this brought great savings to the citizens, companies and government. Since then, we have adjusted monetary conditions more frequently, and in-between NBS Executive Board meetings, and this provided us with flexibility in monetary policy conduct which is particularly important amid instability in the global financial market," she said.

"Further, as of April last year conditions have been tightened with continuous increases in the key policy rate, which we raised from 1 pct to 5.5 pct by February this year," she said.

"At the same time, we used macroprudential policy measures to facilitate loan repayment for bank clients in financial distress.

Numerous measures of the Serbian government also alleviated the impact of cost-push pressures from the international environment," she added.

Speaking about expectations for the period to come, she said that, although numerous risks concerning global inflation and economic growth "persist across the world, there is a reason for optimism if we compare the new projections with those from the last quarter of 2022."

"In Serbia as well, the February macroeconomic projections signal improvement in all segments compared to November."

Tabakovic also said inflation in late 2023 was likely to be two times lower than at the start of this year and that "we now expect it to return earlier within the target tolerance band."

There is "an equal probability that inflation in 2023 and 2024 will be lower than projected," she said.