national bank of serbia governor ’ s opening remarks at the presentation of the inflation report – august 2018 dr jorgovanka tabakovic, governor belgrade, 15 august 2018 ladies and gentlemen, esteemed members of the press, dear colleagues, welcome to the presentation of the august inflation report. as always, we will give you an overview of monetary and macroeconomic trends for the period since the previous report and set out our expectations for the period ahead. given that on 6 august i rounded off my first term of office as the governor, allow me, before i give the floor to my colleagues, to briefly dwell on some of the results achieved over the last six years, since results are the right and only measure of success. as you have witnessed yourself, in the past six years serbia has been transformed into a stable and promising economy – an economy with low and predictable inflation, balanced fiscal account, reduced external imbalances, a downward trajectory of public and external debt, growing investment and recovered labour market. today we live in a country with a significantly lower risk premium, an upgraded credit rating and a better position on the international competitiveness lists. progress is also reflected in lower interest rates and, by all means, in the preserved value of the dinar and opened possibilities for raising our income, all of which boosts investment, exports and production. in such an ambience, serbia ’ s gross domestic product has been on the rise for eleven quarters in a row and, according to our latest projections, this year its growth rate is going to measure 4 %. this is by 0. 5 percentage points more than what was envisaged by our may projection, owing to a faster than projected growth in construction and agriculture – on the production side, and a faster pick up in investment – on the expenditure side. we expect such movements to continue in the period ahead, given that favourable conditions at home support growth in investment and exports and, by extension, higher employment and living standard of citizens. most importantly, the results achieved are long - term and lasting. for five years in a row, inflation has been low, stable, predictable and comparable to that in european countries, and the nbs is trusted that inflation will remain low in the future as well. what we consider our most important result is that low inflation has become a normality in serbia, which means that we have succeeded in achieving our primary objective, mandated by law. not so long ago, in the autumn of 2012, year

measured 36. 2 % ). the effects of macroeconomic stability also lie at the core of investment growth, which additionally accelerated from the start of 2018 and, judging by all indicators, investment share in gross domestic product is likely to exceed 22 % in the year as a whole. apart from increased profitability of corporates and previously mentioned investment loans, a step - up in private investment growth in recent years was also spurred by foreign direct investment. all of this confirms that we are an economy that now attracts an increasing number of non - resident investors with a long - term focus. the rise in foreign direct investment has continued and this year we expect to see a net inflow of around eur 2. 6 billion. chart 13 better financial result of the corporate sector chart 14 investments supported by a rise in profitability, ( in rsd bn ) lending and fdi gave a considerable contribution to gdp growth ( in pp ) 4. 0 3. 5 2. 8 2. 6 1. 9 0. 8 - 1 - 100 - 1. 0 - 1. 8 - 2 - 3 - 200 source : business registers agency. exchange rate losses interest expenses financial result of the corporate sector sources : sors and nbs calculation. * nbs estimate. 2018 * 2019 * net exports final consumption total investments gdp ( in % ) thanks above all to sizeable investment growth, we revised our gross domestic product growth projection for this year from 3. 5 % to around 4. 0 %. that serbia ’ s economic growth stands out is also confirmed by the assessment of the european commission, which sees serbia as the greatest contributor to the western balkan economic growth in 2018. progress in the real sector spills over to the labour market as well, with private sector employment posting a constant rise and the number of the unemployed plunging to its twenty - year low. ladies and gentlemen, esteemed members of the press, dear colleagues, i would like to reiterate that these are only some of the key results we have achieved since 2012 to date. however, it would be immodest to say that we are the only ones to be credited for these results. these measures yield full effects only in coordination with other government policies, and this has been achieved in serbia. i believe that in the last six years we got to know each other very well, so you can rest assured that in the period ahead we will continue to work to the benefit of our citizens and the economy, primarily by ensuring stability