SOME ELEMENTS OF COMPETITIVENESS SOME ELEMENTS OF COMPETITIVENESS OF THE ECONOMY OF SERBIA OF THE ECONOMY OF SERBIA NBRM Conference, Skopje NBRM Conference, Skopje , , 30 May 30 May 2008 2008 Branko Hinić and Milan Šojić, National Bank of Serbia Economic Analysis and Research Department
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SOME ELEMENTS OF COMPETITIVENESS OF THE ECONOMY OF SERBIA NBRM Conference, Skopje, 30 May 2008 Branko Hinić and Milan Šojić, National Bank of Serbia Economic.
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SOME ELEMENTS OF COMPETITIVENESS SOME ELEMENTS OF COMPETITIVENESS OF THE ECONOMY OF SERBIAOF THE ECONOMY OF SERBIA
NBRM Conference, SkopjeNBRM Conference, Skopje, , 30 May 30 May 20082008
Branko Hinić and Milan Šojić, National Bank of Serbia
Economic Analysis and Research Department
ContentsContents
Memorandum of the NBS on Setting Inflation Objectives for
2009 and 2010
Medium-term core inflation objectives
Core inflation projection
World Economic Form - Global Competiveness Index for
Serbia
Investing in Serbia
Memorandum of the National Bank of Serbia on Setting Memorandum of the National Bank of Serbia on Setting Inflation Objectives for the Years Inflation Objectives for the Years 20092009 and and 20102010
Linearly declining band of core RPI year-on-year inflation rates with
Dinar exchange rate and foreign exchange marketDinar exchange rate and foreign exchange market
Non-economic factors had a strong impact on foreign investors’
expectations
Movements in the RSD/EUR exchange rate in 2007 and 2008
76
78
80
82
84
86
Jan2007
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan2008
Feb Mar Apr
80,76
79,66
79,96
78,19
RSD/EUR
76,81
78,89
84,75
77,20
84, 68
77,89
80,30
78,51 78,6
79,90
81,57
80,00
81,38
79,58
82,98
80,78
81,88
79,03
81,82
78,67
82,99
79,76
83,83
81,44
1-20May
83,70
82,02
82,26
79,70
83,87
80,66
...... in Q1 2008, in Q1 2008, quarterly quarterly core inflationcore inflation slowed down slowed down!!
In Q1, core inflation (7.7%, y-o-y) was above the upper bound of the target range in line
with expectations, despite the decline in its quarterly growth rate in Q1 (1.5%) relative to
Q3 and Q4 2007 (2.2%);
In Q1, retail price growth equaled 2.8% (11.8% y-o-y), with regulated prices contributing
1.6 pp.
Retail prices(in %)
11.8
5.6
14.3
11.7
5.1
9.1
0
2
4
6
8
10
12
14
16
I
2006
II III IV I
2007
II III IV I
2008
year-on-year growth quarterly growth, ann.
Core inflation (in %)
11.6
4.0
7.0
7.0
-0.3
5.9
-2
0
2
4
6
8
10
12
14
I2006
II III IV I2007
II III IV I2008
year-on-year growth quarterly growth, ann.
CCore and headline inflation 2001-2007ore and headline inflation 2001-2007
CORE AND HEADLINE INFLATION IN SERBIA
2001-2007
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
2001 2002 2003 2004 2005 2006 2007
Years
In % per annum
Headline inflation
Core inflation
GDP GROWTH RATES 2000-2007GDP GROWTH RATES 2000-2007
GDP- REPUBLIC OF SERBIA Growth rates 2000-2007
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007.
In %
FDI-inward FDI-inward
FDI Stock (2001-2007): $13.5 bn
5. 5. Current account deficit in Serbia and other countriesCurrent account deficit in Serbia and other countries
Current account def icit (% of GDP)
-22
-20
-18
-16
-14
-12
-10
-8
-6
-4
-2
0
2003 2004 2005 2006 2007
Bulgaria
Romania
Slovakia
Serbia
Source: EUROSTAT and central banks' websites.
Slovenia
Croatia
Capital inflows exceeded the current account deficit financing needs in 2007, which
reflects an increase in foreign exchange reserves.
The strongest average increase in foreign exchange reserves in the period 2003-2007 was
recorded for Serbia (7% of GDP).
Changes in central banks' foreign exchange reserves (% of GDP)
-18
-15
-12
-9
-6
-3
0
3
6
2003 2004 2005 2006 2007
Bulgaria
RomaniaSlovakia
Serbia
Note: The minus sign indicates increase in fx reserves and vice versa.
Source: EUROSTAT and central banks' websites.
Slovenia
Croatia
World oil pricesWorld oil prices
World price of Ural oil per barrel (in USD)
115,9
63.1
67.668.8
73.9 73.7
67.571.3
76.4
84,4
90.6 89.093.1
88,8 87.489.4
94,9
101.4100.0
108.2
55
60
65
70
75
80
85
90
95
100
105
110
115
120
May-07
J un J ul Aug
Sep
Oct Nov Dec J an Feb Mar Apr May-08
Average for the period
Annual price growth:
Ural oil 84% (May 2008/May 2007);
Oil derivatives 21.9% (April 2008/April 2007).
Strengthening of the dollar places additional upward pressure on prices of oil derivatives.
In order to boost liquidity in the IFEM, the NBS sold a daily In order to boost liquidity in the IFEM, the NBS sold a daily average ofaverage of EUREUR 4 4..4 4 mln in the year to date mln in the year to date
Purchase/sale of foreign exchange by the NBS in the fixing session and euro exchange rate
-120,000
-100,000
-80,000
-60,000
-40,000
-20,000
0
03
.01
.07
17
.01
.07
31
.01
.07
14
.02
.07
01
.03
.07
15
.03
.07
29
.03
.07
16
.04
.07
30
.04
.07
16
.05
.07
30
.05
.07
13
.06
.07
27
.06
.07
11
.07
.07
25
.07
.07
08
.08
.07
22
.08
.07
05
.09
.07
19
.09
.07
03
.10
.07
17
.10
.07
31
.10
.07
14
.11
.07
28
.11
.07
12
.12
.07
26
.12
.07
14
.01
.08
28
.01
.08
11
.02
.08
26
.02
.08
11
.03
.08
25
.03
.08
08
.04
.08
22
.04
.08
12
.05
.08
(000 EUR)
76
77
78
79
80
81
82
83
84
85RSD/EUR
NBS interventions in IFEM (left scale) Exchange rate (right scale)
No steps have been taken to defend the exchange rate in the fixing session since mid-May 2007;
Since the start of the year, the NBS sold a total of EUR 393 million (outside the fixing session),
compared to EUR 556.7 million sold in the same period a year earlier (in fixing sessions) – 42%
more!
Composition of banking sector trading in the IFEM in 2007 and 2008*
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
J an 2007 Mar May J ul Sep Nov J an Mar 1-16May2008
Bank - bank Banks - NBS
in EUR mln
* NBS sells a portion of foreign exchange purchases from exchange dealers in the IFEM.
The impact of non-economic factors and world financial crisis.
World Economic Form-Global Competiveness IndexWorld Economic Form-Global Competiveness Index-2007-2008-2007-2008 Republic of Serbia..... Republic of Serbia..... rank 91rank 91 of 131 of 131 (score 3.78 of 7)(score 3.78 of 7)