NBS Governor: “Inflation to drop to 8% by the year-end”

National Bank of Serbia (NBS) Governor Jorgovanka Tabakovic said on Wednesday that she expected inflation in Serbia to stand at around eight percent by the end of 2023 because it has been on a downward trajectory since March, when it peaked.

Tabakovic said at the NBS presentation of the August Inflation Report that year-on-year inflation in Serbia is on a downward trajectory, hitting 12.5 percent in July, down by 3.7 pp from March.

The data on core inflation, which declined from 11.3 percent in March to 9.4 percent in July, suggests that inflation’s slowdown is due not only to the declining global prices of energy and food, but also to the monetary policy measures undertaken by the NBS, added the Governor.

“We expect year-on-year inflation to drop by 1 pp each month, and end the year at around 8 percent,” said Tabakovic.

She stressed that inflation’s return within the target tolerance band is expected in Q2 2024, earlier than projected, on account of further tightening of monetary conditions in June and July.

Economic growth at home picked up to 1.7 percent year-on-year in Q2, on account of the recovery of the construction sector, the gradual weakening of the effects of elevated costs in production and the resolution of global supply chain halts, she said.

The Governor said economic growth in Serbia is expected to accelerate further in the rest of the year and reach between 2 and 3 percent at the year level, adding the NBS estimates that the growth rate will be closer to the lower bound of the projected band.

The reason behind our caution are primarily “poorer performances” of the production sectors of Serbia’s key trade partners, notably Germany, and lower personal consumption in the year so far, said Tabakovic.

(RTS, 17.08.2023)


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