Financial Stability Report No1 20 December 2010 - Banka Qendrore ...

Number 1Financial Stability Report8.3.5 SerbiaSerbia pursues the managed floating exchange rate regime. This enables the interventionof the National Bank of Republic of Serbia (NBRS) of keeping price stability and the foreignreserves at adequate level. Serbia uses interest rates as its main monetary policy tool.Figure 64. Inflation, average consumerpricesFigure 65. Real growth and budgetbalance, in percent14.012.0865.2%6.9%5.4%10.048.06.04.02.00.02006 2007 2008 2009 2010 projChange in CPI, SerbiaChange in CPI, EurozoneChange in CPI, CEFTASource: WEO April 2010, IMF20.0%-2.0%0-2-1.6% -1.9%-2.6%-4-4.5% -4.2%-62006 2007 2008 2009 2010 projBudget balance (% of GDP)∆ in real GDPSource: WEO April 2010, IMFAverage inflation during 2000’s was the highest in the region. Generally, Serbia hasinherited lack of trust in dinar due to hiperinflation during ’90s, which in effect has usuallycaused high inflationary expectations. Morover, gaining dinar confidence was hardlypossible considering the expansionary monetary policies of the NBRSin order to financehigh current account deficit and buy foreign reserves. Entering in the IMF financialprogram in 2009 helped Serbia in stabilazing inflation considerably.Serbia trades with EU countries (54 % of exports and 55 % of imports) rather than CEFTAcountries (31% of exports and 8% of imports. Prior to global crisis, similar to Bulgaria,Serbia has enjoyed fast economic growth. In late 2008 global crisis hit Serbia through atrade shrink, a sudden decline of the capital inflows and household deposit withdrawal.Banking sector in Serbia is highly euroized, also because of the favouring of the EURO tolocal currency. There are four Greek bank subsidiaries in Sebia, which account for around14 % of total assets.8.3.6 MontenegroPrior to introduction of the EURO, Montenegro has highly used Deutsche Mark (DM) inprivate and banking sector. With the introduction of the EURO, the Government hasdecided using EURO as its legal tender. The average inflation during 2000s appears to behigher than the inflation of the region, up to 2009, even though following the same patternof movement. Similar to other countries in the region, Montenegro is considerably linkedwith EU countries through trade and capital flows. More than 50 % of the Montenegroexports are addressed to EU, mostly Greece (22 %) and Italy (12 %). On the other side, 41 %of imports come from Serbia, while 31 % from EU countries.68 |