Jorgovanka Tabaković, Governor Of The National Bank Of Serbia

We believe that FDI inflows will reach around four billion euros by year’s end. This is good news, as it shows that investors recognise Serbia as a place with a favourable macroeconomic and regulatory environment even during periods of uncertainty and economic slowdown globally

The inflation target of the National Bank of Serbia equals 3% with the tolerance band of ±1.5 percentage points, which is expected to be reached by the middle of next year. In the opinion of Governor Jorgovanka Tabaković, the best way in which the National Bank of Serbia can contribute to economic growth is to reduce inflation..

“We do this through the gradual, continuous and well-measured tightening of monetary conditions, while taking into account economic growth. We also contribute to this by maintaining the stability of the exchange rate, particularly during periods when we face pronounced global uncertainty. In such situations, we prevent a fall in business, investment and consumer confidence by preserving exchange rate stability,” explains Governor Tabaković.

As the Governor explains, we had a typical example of that in the first half of 2020, following the outbreak of the pandemic, and in the first half of 2022, following the outbreak of the conflict in Ukraine. However, in both instances, investments and exports very quickly returned to their previous levels.

What lessons has Serbia learnt with regard to the impact of events in the energy sector on macroeconomic stability and inflationary movements? Do we have enough reasons to believe that such disturbances will not happen again?

The most important lesson that should be considered every day in the economy is market diversification, in every sense of that word, but there’s also awareness of the importance of strategic fields in which the state must maintain an effective presence, because the state is expected to ensure conditions for doing business and for people’s lives, with energy stability and food production being top priorities. When it comes to Serbia, apart from the sudden hike in the price of gas, we were also hit by an extremely bad hydrometeorological situation that was not conducive to the generation of electricity, with coal production also hit hard.

We reduce inflation through the gradual, continuous and well-measured tightening of monetary conditions, while taking into account the growth of economic activity

Despite these challenges, Serbia has once again become a net exporter of electricity, with net exports of electricity exceeding 300 million euros in the first six months of this year. At the same time, additional supplies of gas were provided during peak consumption months through the renting of gas storage facilities in Hungary. In the period ahead, it is important to continue reforming, restructuring and improving the governance of state-owned energy companies, so as to align their operations with market principles. 

What are your expectations when it comes to overall FDI levels by year’s end 2023?

FDI inflows in the year to date have indeed been high, and our projection – which is conservative, as always – is that FDI will total around four billion euros at the year level.

This is good news, as it shows that, even in a period of uncertainty and slowed economic growth globally, including geopolitical tensions that aren’t bypassing us, investors still recognise

Serbia as a safe place to invest and they recognise the favourable macroeconomic and regulatory environment that we’ve created. The strong inflow of investments in Serbia, from both traditional partners –European countries – and from the countries of East Asia and the Middle East, also testifies to our country being recognised around the world as a secure place for investment.

How significant for you is Serbia’s decision to request a new Stand-by Arrangement with the IMF?

The fact is that Serbia has implemented robust measures over the course of the previous decade that have ensured the country’s macroeconomic stability, growth and better living standards for citizens. Nevertheless, under the conditions that the whole world has been operating in for a long time already, the use of all protective mechanisms must be an essential element of economic policy. One such mechanism is also the arrangement with the IMF. The agreed economic programme doesn’t include any reform goals for the National Bank of Serbia.

The National Bank is working actively to prepare the draft law that will comprehensively regulate the crowdfunding of economic projects, which will contribute greatly to the further development of SMEs

However, the fight against inflation is the number one priority for us, as it is for most central banks around the world. In this struggle, we remain devoted to preserving the relative stability of the dinar exchange rate, which the IMF has also recognised as an important pillar of the country’s overall macroeconomic stability.

At the recent first conference on financial services organised by the Foreign Investors Council, we had an opportunity to hear new ideas about the introduction of digital solutions. Which of the ideas and initiatives presented at the conference were the most important for the National Bank?

Listening to the needs of the market and the demands of digitalisation, the National Bank of Serbia is investing great efforts to contribute to the development and modernisation of financial services. Testifying to this is the increasing popularity of our instant payments system. Serbian citizens have at their disposal a number of advantages enabling them to use the national DinaCard.

The National Bank is working actively to prepare the draft law that will comprehensively regulate the crowdfunding of economic projects, which, I believe, will contribute greatly to the further development of small and medium-sized enterprises. We are also in the final phase of the process of digitising bills of exchange, the introduction of which will create conditions for businesses and citizens to make additional savings.

What are your forecasts for 2024 when it comes to economic indicators?

When it comes to projecting inflation, the most important thing is that it is now on a stable downward trajectory. According to our projections, which haven’t essentially changed since November last year, inflation should fall to around 8% by year’s end, while it should return within the target tolerance band by the middle of next year. Our last official GDP growth projection for this year is in the range of 2% and 3%, and we still consider it most likely for growth to continue to move within that range, though it is more realistic for it to be closer to the lower level. When it comes to 2024, under the assumption that growth will accelerate in the euro area and investments in Serbia will further intensify, we consider it realistic for Serbia to record economic growth in the range of 3% to 4%.