Jorgovanka Tabaković: Even during the crisis Serbia remained an
investment center committed to people, cooperation and improving
the conditions we live and work in
Speech (recorded) by Ms Jorgovanka Tabaković, Governor of the National Bank of Serbia, for the
postponed Money Fair Conference 21 that should have taken place on 4 March, 4 March 2021.
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Dear hosts, sponsors, friends and participants in Money Fair Conference 21,
It is a pleasure to be able to greet you even in this virtual format. Your invitation letter also
unambiguously states the robustness of our response to the current global crisis. I quote: "The
great financial and economic bulwark erected by the Government and the National Bank of
Serbia, with the visionary courage of President Vučić, is a strong safeguard against shocks
awaiting the global economy". Did we have the right not to respond or not to respond vigorously?
I claim we did not. That was our responsibility towards citizens, who must trust policy makers,
and the trust is not gained with words and nice wishes, but through actions and results. I believe
we thus also support the people's expectations for a better life, which they justly have. This is our
obligation towards businesses as well. All companies, micro and small, medium-sized and large,
need stability - political, monetary, financial. They need the certainty of doing business. In such
conditions, from 2015 to 2019, the profit of our corporate sector was on a constant increase. The
impact of the monetary policy of the National Bank of Serbia on such result was - someone
would say - significant, or, as others would say - not negligible. Judge for yourselves! Over 50%
of the corporates' higher profit in that period was the result of two categories on which the
National Bank of Serbia has a decisive influence: more favourable financing conditions and
relative stability of the dinar exchange rate against the euro. And that is my message - the
National Bank of Serbia will at all times be there for its citizens and businesses, so that we may
last long and prosperously.
Dear colleagues,
In Serbia, already in the first days of the pandemic, both the National Bank and the Serbian
Government responded, in coordination and each in line with its competences. In an environment
when short-term economic indicators of business confidence plummeted across the world, it
was paramount to design comprehensive economic measures, implementable in the shortest
time possible. We were able to respond with a huge package of measures owing to the
monetary and fiscal space we created in the past period. Had we postponed the adoption of
measures, the consequences of such irresponsible behaviour would have been enormous. We
would have witnessed unemployment, factory closures, billions of euros of GDP lost. Had we not
responded immediately and comprehensively, we estimate that GDP would have fallen by over
6% in 2020, while the recovery, as was the case after the earlier, 2009 crisis, could last three to
five years. Owing to everything we have done, including the latest government measures, Serbia
will recover from the consequences of the pandemic in the course of this year.
Dear friends,
We would not be able to talk today about sustainable development and innovation had we not
protected our economy from the consequences of the pandemic with our measures. Almost
each month the National Bank of Serbia responded with some of its measures.
To support economic recovery, in 2020 we cut the key policy rate four times, to the current
level of 1.0%.
We ensured even more favourable financing conditions, with interest rates on new dinar
corporate loans reduced by additional 0.8 pp in 2020 (to 3.2% in December).
As a result of all the measures we have adopted, total domestic lending continued at an
almost two-digit growth rate for the third year in a row, with sound y-o-y growth of 9.9%
recorded in December. Owing to all the measures, and despite the pandemic, the NPL ratio
was lowered further, from 4.1% to 3.7%.
Thanks to the combination of all the adopted measures, last year interest rates on dinar and
euro-indexed corporate loans almost equalised, led by a reduction in dinar interest rates. We
had never had such situation in Serbia before. Moreover, in January this year the interest
rate on dinar corporate loans of 2.2% was at a significantly lower level than the interest rate
on euro loans which measured 2.8%.
You have also seen that inflation in Serbia is no longer talked about. In 2020 as well, we
maintained average inflation at 1.6%, i.e. we continued to fulfil our primary objective even in
the crisis year.
We have also preserved the relative stability of the exchange rate, this being one of the key
contributions to overall macroeconomic stability of the country and business certainty.
Changes in the dinar exchange rate against the euro were registered on the second decimal
place.
Gross FX reserves worth EUR 13.5 bn at end-2020 were higher by EUR 113.2 mn
compared to end-2019. By responsibly managing FX reserves, we also raised the share of
gold, as a safe-haven asset, to 13%, versus mere 5.7% in late 2012.
Owing to the efforts of policy makers to preserve our economy, despite the pandemic, the
inflow of foreign direct investment to Serbia exceeded EUR 3 billion, which was the highest
level in the region. This is concrete evidence that Serbia has been recognized as a regional
investment centre. For our people and our economy, this means more jobs, higher wages
and new technologies.
Dear friends,
A year ago, I reminded the public of our long lasting efforts to have dinar bonds of the Republic of
Serbia included in the renowned J.P. Morgan family of indices. At the time, I expressed hopes
that we would manage to achieve this by mid-2021. Commitment and strategic efforts invariably
produce results and, on 11 February, J.P. Morgan announced its decision to include our
dinardenominated bonds in this prestigious family of indices as of 30 June 2021. This has sent yet
another powerful signal that Serbia is a safe and desirable investment destination and that it will
remain so in the coming years.
For us, it is of key importance that our businesses and households have remained confident that
the government and the central bank will at all times be there for them, at their side, taking care
of jobs, wages, preservation of production capacities and liquidity. What do figures tell us? The
number of formally employed persons in our private sector increased by around 42 thousand in
2020.
Dear colleagues,
I believe that it is the task of institutions to make life easier and simpler for people and
businesses so that they can use their time, as the most valuable resource, in the best possible
way. Over the past eight years, the National Bank of Serbia has demonstrated on its own
example that, in terms of innovation and financial services, our country is on a par with the most
advanced economies of the world, and sometimes even ahead of them.
Thanks to the state-of-the-art technology which we were among the first in the world to apply, our
payment service users no longer need to go a bank, as they can now make instant payments
safely and quickly, at any time and any place, since the launch of our NBS IPS system in
October 2018. To date, around 37.5 million transactions worth a total of around RSD 363 bn
have been executed in this system. For us, this is an important indicator that instant payments
have become the implied service quality for payment service users.
Users have also become quickly accustomed to the service enabling payment of monthly bills in
a few seconds only, using the standardized NBS IPS QR code and mobile banking applications.
We have also enabled instant payments at merchant POS, both physical and online, at around
2,200 points of sale within Roda, Idea and Mercator retail chains and at NIS Company petrol
stations. We are currently working on expanding the acceptance network to include several large
retail chains. A number of online traders have enabled instant payments in their web shops
(including stores selling technical devices but also, to my great pleasure, local publishing houses
and bookstores).
Financial service consumers in the Republic of Serbia are among the first in Europe to be able to
conclude distance financial contracts, with full transparency, security and protection of their
rights. It is now possible to open a payment account, apply for a payment card or loan without
going to a bank. In 2020, we had 71.5 thousand distance contracts, which is roughly 62% more
than in 2019, with over 6,000 of these contracts concluded using video-identification of the
consumer.
Let me add another thing. Innovations make life easier. Innovations save time, our most valuable
resource. But technologies should be in the service of people, and not the other way round. They
are a means to an end, and not an end in themselves. Technology alone is not able to solve
major economic challenges: it cannot set priorities or make decisions on spending or
investment. I believe you will agree that knowledge and human capital are among the key drivers
of development and change in the 21st century.
Dear friends,
The need to send a powerful, clear and timely signal of stability, hand in hand with a proactive
approach and measures which take account of both the intensity and the duration of negative
trends to which response is needed, becomes even more important at times of crises. If central
monetary institutions recognize this, they will be a few steps ahead of the challenge. I believe that
figures show that this is precisely what the National Bank of Serbia has done. Timely measures
taken as soon as the COVID-19 crisis broke out prevented a spiral of negative events triggered
by psychological effects and panic reactions of market participants from happening. Even during
the crisis, Serbia remained a regional investment centre committed to people, to improving the
conditions of life and work, as well as to regional cooperation. Nothing connects countries and
people better than the economy and common interests! Today, we are creating a future to the
benefit of the human civilization which can only survive and thrive if it cooperates and works
together.
Challenges remain ahead of us and our job never ends. But my message is that you can always
rely on the National Bank of Serbia, the bank of all our citizens!
I wish us all health, knowledge and love for our countries!
May we have a successful conference!