national bank of serbia opening remarks at the presentation of the inflation report – may 2019 dr jorgovanka tabakovic, governor belgrade, 15 may 2019 ladies and gentlemen, esteemed members of the press, dear colleagues, welcome to the presentation of the may inflation report. we will give you an overview of the current macroeconomic developments, our new inflation and economic activity projections, as well as monetary policy decisions in the period since the previous report. to begin with, i would like to underline that positive economic trends have continued in 2019 – macroeconomic and financial stability have been preserved, economic, investment and external trade activities have increased, while the share of our country ’ s public debt in gdp has contracted even further. all of this has been achieved despite the adverse effects of some factors from the international environment, notably the slowdown in euro area growth. for six years in a row, inflation has been low and stable, and we expect it to remain so in the coming period as well. in accordance with our expectations, inflation has continued to move within the bounds of the target tolerance band ( 3. 0±1. 5 % ) in 2019. in april this year, consumer price growth equalled 3. 1 % y - o - y, with more than half of the increase attributable to the rise in the prices of vegetables on account of the low base and last year ’ s dampened yield in other parts of europe as well. other than that, inflationary pressures remained low on both the cost and supply sides, as attested by the core inflation of 1. 4 % in april. as announced in february, we expect inflation to slow down during the next 12 months due to the base effect from vegetable prices. we expect it to come close to the target midpoint over the medium term, which will be facilitated by growth in aggregate demand. to put it briefly, inflation will remain low and stable within the bounds of the target tolerance band until the end of the projection horizon, i. e. over the next two years. these are also the expectations of the financial and corporate sectors. anchored inflation expectations are indicative of monetary policy credibility, which contributes to greater resilience to potential negative effects of developments in the international environment. chart 1 contribution to y - o - y consumer price growth chart 2 inflation projection ( in pp ) ( y - o - y, in % ) - 2 food services energy industrial goods excluding food and energy consumer prices ( % ) targeted inflation

industry ( rhs ) and what is driving investors to invest in serbia? importance of structural reforms is clearly confirmed through reforms we imposed. from the central bank perspective, the most important and hardest was to provide price stability and regain trust in monetary policy, due to hyperinflation in the past. and during the last half a decade inflation in serbia has been kept under control. according to the global competitiveness index, inflation in serbia is no longer a limiting factor for doing business ; as was the case for example back in 2010. on the contrary, a low inflation environment is perceived as one of the key factors of a stable business environment in our country. further, relative stability of the exchange rate, the mentioned results on the fiscal front, as well as in many other areas as part of stabilisation agenda, are perceived as vital for fdi attraction. this is all confirmed by many studies, such as world bank study from 2018 showing that countries with lower exchange rate and inflation volatility had higher fdis in terms of gdp. not to forget, in terms of fdis attraction, of outmost importance is also political stability. the same is assessed by moody ’ s rating agency in their latest yearly report, stating that serbia clearly ranks above the countries with the same rating, when it comes to political stability and government effectiveness. in such environment foreign investors are rather reinvesting their profit in serbia, than sending it back. on average – around 60 % of profit is being reinvested. what is ahead of us? i believe that the integration in infrastructure flows, the latest technological projects and innovations, in line with our potentials, are the basis for serbia ’ s growth. at the same time, this is the basis for investment. and our potentials are geographic position and work force. anyone offering a partnership in this context is welcome. it is up to us to provide macroeconomic stability and equal treatment for all investors. we do not have the privilege or the reason to measure this by any other criterion, but the interest of our citizens in better living standards and sustainable growth. and investments diversified by country and branch, are the guarantee to the achievement of our goals which are written in all the preambles of the most reputable and the most significant international institutions. of course, we can always do more. each one of us present here. therefore, allow me to quote a message stated in the joint conclusions : “ across the region, further efforts are needed to tackle