rates, in % ) ( y - o - y rates, in % ) current inflation financial sector * corporate sector * financial sector - bloomberg - 2 12 3 12 3 source : nbs. 12 3 12 3 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 sources : gallup, ipsos / ninamedia, bloomberg and nbs. * ipsos and gallup until december 2014, ninamedia since december 2014, and ipsos since january 2018. our decision to keep the key policy rate unchanged at 6. 5 % in the period since the previous report was underpinned by the projected inflation movements and the transmission of the effects of past monetary tightening to interest rates in the money, lending and savings markets, as well as to inflation expectations. from this time distance, taking into account movements in key macroeconomic indicators, we may freely say that it is thanks to our monetary policy, which we tightened at a continuous, but moderate and measured pace, that a concurrent reduction of inflationary pressures and inflation ’ s return within the target band over the monetary policy horizon were achieved. the negative effects on economic growth were minimised and the financial stability fully preserved. this is confirmed by the fact that the share of npls in total loans has remained at its historical low of around 3 %, underpinned by a robust regulatory framework and a carefully designed mix of monetary and macroprudential policy measures. a good example of such policy is our september decision to cap the interest rate on variable - rate housing loans at 4. 08 % for first - time home buyers. this decision has had no major impact on the banks ’ financial result and does not fuel inflationary pressures, but it has helped alleviate the credit risk and preserve financial stability, and, to an extent, supported the recovery of personal consumption. 3 of 9 chart 5 movement in the key policy rate and average repo rate chart 6 npl level and share in total loans, gross principle ( in rsd bn ) ( in % ) ( daily data, p. a., in % ) household sector corporate sector other sectors npl share in total loans ( rhs ) key policy rate lending facilities rate deposit facilities rate average repo rate 1 / 2020 7 / 2020 1 / 2021 7 / 2021 1 / 2022 7 / 2022 1 / 2023 7 / 2023 1 / 2024 source : nbs. source : nbs. that we have managed to achieve the so -

called “ soft landing ” by pursuing an appropriate monetary policy is also confirmed by gdp growth which measured 3. 8 % y - o - y in q4 2023 or around 1 % s - a relative to the previous quarter, according to our estimates. such gdp movements are consistent with the sors preliminary estimate which places 2023 gdp growth at 2. 5 %, and with our november projection. economic growth was led by elevated activity in all production and most service sectors. an almost equal impetus came from industry, construction and agriculture. on the expenditure side, the key impulse is estimated to have come from net exports due to the real growth in goods and services exports and a fall in imports in h1 2023, as well as from fixed investment. to a lesser extent, growth was also supported by personal consumption which rallied in h2 2023, mostly reflecting real wage growth due to inflation ’ s slowdown and fiscal incentives. the acceleration of economic activity in h2 2023 will make it easier to achieve the economic growth rate projected for this year, and the carry - over effect from 2023 is estimated at 1. 5 pp. taking into account this and the accelerated investment cycle implementation, we expect gdp growth to pick up to the range of 3 – 4 % this year, with central projection at 3. 5 %. we revised up our growth projection for the next two years to the range of 4 – 5 %, having in mind investments planned in the lead - up to hosting expo 2027. in our estimate, personal consumption will remain an important growth factor this year, reflecting the preserved labour market and the continued rise in households ’ employment and income, but not to an extent that could fuel any major inflationary pressures. another important growth factor are investments, private 4 of 9 and government, which raise the potential output. private investment growth will be supported by reduced inflationary pressures, preserved investment confidence, increased corporate profitability and the expected high fdi inflows. substantial government investment in transport, energy and utility infrastructure has been planned, as have other projects recently presented by president vucic as part of the “ leap into the future – serbia expo 2027 ” programme. chart 8 contributions to real gdp growth, expenditure side chart 7 contributions to y - o - y gdp growth rate, expenditure side ( in pp ) ( in pp ) net exports change in inventories gross fixed capital formation government spending household consumption gdp ( in % ) - 2 - 3 - 4 - 6 change