policies and will remain an important pillar of price stability. – administered price growth is much slower than anticipated. and while in the period to 2013 administered prices increased at a rate of around 10 %, providing a stronger contribution to inflation, their growth over the past two years has been much slower. this year, administered prices are expected to rise by around 2 %, adding about 0. 4 percentage points to inflation. – the inflation expectations of the financial and corporate sectors have been moving for an extended period of time between 2 and 3 %, which is close to the new target and facilitates its achievement. all these reasons may be summed up in the fact that owing to the monetary policy measures and the invaluable contribution of fiscal consolidation implemented by the serbian government, our country has joined in the ranks of european countries with low and stable inflation. by lowering the inflation target, based on the results and expectations described, we are re - asserting our determination to safeguard this position for serbia. we often point out that the relative stability of the exchange rate is one of the factors that helped keep inflation low in the previous three years. we have managed to preserve the relative stability of the exchange rate in the face of persistent uncertainties over monetary policy moves of leading central banks, which affect capital flows to emerging economies and their currencies. in the conditions of further narrowing of foreign trade and fiscal imbalances, a falling country risk premium, an upgrade in the country ’ s credit rating and a positive assessment of the imf regarding the overshooting of the quantitative criteria under the programme, the dinar came under appreciation pressure. short - term appreciation pressures were moderated by interventions in the interbank foreign exchange market, which also helped increase serbia ’ s foreign exchange reserves since july by eur 680. 0 million. ladies and gentlemen, dear colleagues, while my associates from the directorate for economic research and statistics will present in detail our latest projections, i would only like to highlight several key messages. based on our most recent projection, which has been revised upward for the third time this year, gdp will grow 2. 7 % in 2016. in 2017, gdp growth is expected to step up to 3 %. for the second year in a row, serbia has recorded excellent and well - deserved progress on the world bank ’ s ease of doing business index, and this year it is one of the ten countries that have most improved the ease of doing business. that the progress is merited and that the

jorgovanka tabakovic : overview of developments in the serbian economy introductory address by dr jorgovanka tabakovic, governor of the national bank of serbia, at the presentation of the inflation report – may 2014, belgrade, 14 may 2014. * * * ladies and gentlemen, despite challenges created by the global economic crisis, last year the serbian economy made a significant progress in macroeconomic adjustment and continues along the same path this year as well. inflation has been moving around the lower bound of the target tolerance band since october. in view of the weakening of inflationary pressures, as confirmed by stabilisation of inflation expectations close to the target, it is likely that we will maintain price stability at the target level of 4 % in the medium run. though interest costs on external debt have increased, the current account deficit was halved in the first three months of 2014 from the same period last year, owing to the continued positive tendencies in foreign trade. based on our estimate, the recovery of external demand and low domestic demand will lead to further narrowing of external imbalance in the course of this year, which creates a more solid foothold for the sustainability of the external position of the serbian economy and the stability of the dinar exchange rate. the recovery of economic activity continues due to increased external demand. let us recall that serbia ’ s gdp growth measured 2. 5 % last year and was almost the highest in the region. yet, despite the expected recovery in the euro area, our major foreign trade partner, we expect the pace of gdp growth to slow down to around 1 %, on account of the exhaustion of effects of increased capacities in oil and automobile industries and excellent last year ’ s agricultural performance. in addition, negative effects of fiscal consolidation and structural reforms on economic activity will inevitably be felt in the near term. however, fiscal consolidation measures and structural reforms are a must if we are to have sustainable economic growth. the new government is facing all but an easy task which is to implement tough and swift fiscal consolidation measures and reform the public sector, while at the same time employing its rather scarce resources to underpin economic activity and ensure growth in employment. let me underline that economic policy measures announced by the new government show its commitment to fiscal consolidation and the implementation of long - delayed structural reforms, which has been recognised by both the domestic financial market and foreign investors. we expect these efforts to lead to the conclusion of an arrangement with the imf as an additional guarantee to investors that