national bank of serbia introductory speech at the presentation of the inflation report – august 2021 dr jorgovanka tabakovic, governor belgrade, 18 august 2021 ladies and gentlemen, esteemed members of the press, dear colleagues, allow me to bid you welcome to the live presentation of the august inflation report after more than a year, with a sincere wish that in the coming period we continue to hold press conferences in this manner. apart from monetary policy decisions and our estimates about inflation movements, one of the spotlight topics in the world, i believe that the fact that we have revised our most important macroeconomic projections will be of special interest and importance to you. i am sure that you all know very well that when the national bank of serbia revises its projections and communicates that to the public, such revisions are always based on serious and detailed analyses and firm arguments. this is the reason why we stand before you today, in a good mood and ready to answer any questions you may have. though the risks emanating from the international environment still persist, the serbian economy continues to grow, even faster than initially expected. such movements were largely supported by a comprehensive package of measures adopted already at the start of the pandemic. i have emphasized that publicly several times before and i will do so again – timely and well - calibrated measures of monetary and fiscal policies minimised the economic consequences of the pandemic, accelerating the recovery of our economy. we reacted timely and adequately, and that way, at the time of greatest uncertainty, we prevented the spillover of the pandemic - induced crisis on the fall in business and consumer confidence. at the same time, we managed to preserve the labour market and production capacities of the economy. illustrative of this is the fact that we ended the year 2020 with one of the best economic results in europe, and this year we expect to maintain the leading economic performance. chart 1 revisions of serbia's gdp growth projections for 2021 and the medium term ( in % ) ( y - o - y rates, in % ) chart 2 gdp growth projection 6. 5 6. 0 4. 5 4. 0 - 4 - 8 old projection source : nbs. medium term new projection ii iii iv i ii iii iv i ii iii iv i ii iii iv i ii source : nbs. the pre - crisis gdp level was exceeded already in q1 – one quarter earlier compared to the initial estimates, and the recovery extended in q

##2, when gdp rose 13. 4 % in y - o - y terms. such outcome reflects in part the low base, but also favourable trends since mid - last year. based on the indicators in the first six months and the expected movements in the key sectors of the serbian economy by the end of the year, we revised our economic growth projection for 2021 upward, from 6. 0 % to 6. 5 %. as always, we remain cautious, having accounted for all the risks associated with the further course of the pandemic. we incorporated in our projection the possibility of a new pandemic wave in autumn, but if such wave turns out to be milder and without any major consequences on the economy, our growth this year could even exceed the projected 6. 5 %. at the same time, starting from the analysis of planned capital projects in road, railway, energy and utility infrastructure in the next ten years and their direct and indirect effects on other parts of the economy, we revised the medium - term economic growth projection – from 4 % to the range of 4 – 5 %. the central projection of gdp growth over the medium term now stands at 4. 5 %, while overall risks to the projection are judged to be symmetric. according to our new projection, taking into account the estimated effects of planned infrastructure projects, the share of construction in gdp in the medium term, instead of the previously expected 6 %, should reach around 7 %, and this sector ’ s growth should positively reflect on growth in industry, trade, transport, tourism, catering, as well as the sectors of finance and real estate. at the same time, the share of total fixed investment in nominal gdp in the next few years should reach and go beyond 26 %, hovering at high levels for a longer period thereafter. the improved quality of infrastructure will positively reflect on the productivity of the overall economy and continued strong inflow of fdis, thus creating conditions for the sustainability of the projected growth in the medium term. chart 3 share of construction in nominal gdp ( new and previous projection ) ( in % ) 7. 5 7. 2 7. 4 7. 3 7. 2 6. 4 6. 5 6. 0 6. 1 5. 3 26. 4 26. 2 26. 0 24. 8 24. 2 5. 7 5. 5 26. 0 6. 8 7. 0 22. 5 22. 5 23. 5 23. 6 23. 8 24. 1 24.