Serbia decreases targeted inflation due to increased economic activity

The National Bank of Serbia (NBS) decided to decrease the targeted rate of inflation to 3.0 percent in 2017, its governor Jorgovanka Tabakovic announced here Monday.

Tabakovic presented the annual inflation report on Monday that shows inflation in Serbia is low and stable. She said an increase of all macroeconomic indicators and prospects for the future was marked since the beginning of last year, which motivated the National Bank of Serbia to decrease the targeted inflation rate from 4.0 to 3.0 percent.

"Targeted inflation since 2017 will be lower by one percent than the rate in effect since 2012. By this we show that the convergence with the European Union has already been made in the area of the financial sector," Tabakovic said, explaining that the permitted deviation from the targeted inflation would remain at 1.5 percent.

She added that the NBS had, for the third time, decided to increase the projected the gross domestic product (GDP) growth, this time to 2.7 percent.

"We have corrected the growth projection of the economic activity upwards for the third time, while we corrected the projection of the budget deficit downwards, as did the International Monetary Fund (IMF) and the European Commission," she explained.

"We expect the growth to accelerate to 3.0 percent in 2017," she announced, concluding that the inflation in the past three years had been low and stable and that it would stay at that level.

Ana Ivkovic, general director of the NBS Directorate for Economic Research and Statistics, explained that economic activity had marked continued growth, and exceeded expectations in third quarter of this year due to an excellent agricultural season along with favorable tendencies in the manufacturing industry and construction.

She estimated that the GDP growth in the third quarter of 2016 was 0.5 percent higher than in the second quarter, and 2.5 percent higher than in the same period last year.

"Growth in industrial production has continued due to the activation of earlier investments, lower operating costs, and economic recovery of the euro zone. In addition, there has been further increase in construction, which is driven by the continuation of intensive realization of infrastructural projects. Most of the service sectors continue to grow and while mining and energy sectors are recovering thanks to the effect of putting repaired plants into operation," Ivkovic said.

She concluded that the projected GDP growth of 3.0 percent in 2017 would be guided by investments, while reduced spending, expected increase in the employment rate and income in the private sector would give a "positive contribution." Endit