jorgovanka tabakovic : national bank of serbia remains synonym for stability and trust address by dr jorgovanka tabakovic, governor of the national bank of serbia, at the economic and financial dialogue between the eu and the western balkans and turkey, 12 july 2021. * * * good afternoon everyone, at the very start, i wish to greet you on behalf of the national bank of serbia and to thank you for having recognized the scope of our response to the pandemic. in your estimate for serbia you stated that “ the impact of the covid - 19 crisis was mitigated by а strong pre - crisis momentum ”, also on account of “ prudent policies during past years ”. i add to that that in serbia we did not wait for the crisis to recognize the importance of building buffers or to recognize our development chances. we worked strategically to broaden the base of investors and markets, which is also reflected in your assessment that the “ contraction of goods exports in serbia was limited due to their diversification achieved in earlier years ”. this is the right moment to mention president aleksandar vucic. without his strategic decisions, we wouldn ’ t be able to talk today about serbia ’ s strong response to the pandemic or about the fact that our gdp exceeded its pre - crisis level already in the first quarter of this year. you also stated that “ in a timely and forceful response to the pandemic, the national bank of serbia has taken a range of measures to maintain price stability and support the economy “. here i wish to add that the national bank of serbia was often “ the first resort ” of responses, supporting our citizens, businesses and the government to more easily overcome the crisis financially. we also ensured smooth functioning of all financial flows during the pandemic. we lowered the key policy rate, provided dinar and fx liquidity, introduced facilities for the repayment of obligations. we also bought government securities in the secondary market and broadened the collateral for monetary operations. in doing all this, our message was clear – we respond to temporary shocks with temporary measures. what are the effects of the national bank of serbia and the government measures? lending activity has remained a stable source of financing the private sector. its structure in terms of currency, sector and purpose contributes to the even recovery of consumption and investment. the dinarisation of corporate loans is by over 9 percentage points higher compared to the precrisis period.

1999, 18 % in 2000, and reaching around 12 % recently, in spite of some re - entry npls. development for monetary policy before i go on to discuss obstacles and challenges, let me briefly recap on the changes that have taken place regarding monetary policy since the 1997 crisis. after thailand floated our currency in 1997, the bank of thailand recognized the need to search for a new and appropriate nominal anchor for monetary policy. we also recognized that the central bank's credibility is crucial in assuring the public on the smooth operation of our economy. the bank of thailand decided to adopt inflation targeting as the framework for our monetary policy. inflation targeting is not simply setting an inflation target. it is instead an approach that emphasizes ( a ) a forward looking economic forecasts using the most reliable economic models, ( b ) transparency in communicating to the public the reasoning for policy stance, and ( c ) accountability to ensure that promises of price stability are upheld. we have chosen to target core inflation, a measure which excludes volatile components, namely raw food and energy prices. our target range has been set between 0 to 3. 5 percent until 2002. when i stepped in as a governor in june, bearing in mind that our current account surplus was decreasing ( due to a reduction of external demand ) and international reserves may be affected, a review of the monetary policy was made. it was however agreed that inflation targeting framework should remain for price stability is still very important to prevent the economy from another crisis. however additional attention was emphasized on certain elements. international reserves which seem to be treated as exogenous factor under the framework have been brought into consideration, with the belief that healthy reserves are needed to maintain investor's confidence amidst the current slowdown of world economy. an increase of repurchase rate ( 14 days ) from 1. 5 % to 2. 5 %, with the aim to correct the distorted structure of local interest rates, did help to reduce the gap between local interest rate and libor, making it less attractive for capital outflow. more important is the emphasis on the managed float concept to limit short - term volatility of baht exchange rate which did help to lessen the fear that baht would depreciate further. whenever baht swings to the weak position, such fear would lead to the prepayment of us $ loans by private sector or even by states enterprises which were really prepared to do so before i stepped in. it is noteworthy that baht