income account, where the surplus widened. given that h1 saw the lowest current account deficit on record, equalling only 1. 6 % of gdp, we now project it at around 2. 5 % of gdp at the level of the entire year, instead of 4. 5 % 1 of 10 that we expected in may, though back then we also emphasized the high probability that the deficit would be lower than projected. – according to preliminary data, foreign capital inflow from fdis reached eur 2, 442 mn in seven months, exceeding the current account deficit multiple times. this fuelled appreciation pressures, to which the nbs responded by buying foreign currency worth close to eur 2. 5 bn net in the year to july, boosting fx reserves to a new record high of eur 23. 1 bn in late july. – in the year so far, fiscal trends have exceeded expectations, owing to higher revenues, notably in light of increased profitability of corporates last year and savings on funds intended for overcoming the energy crisis. this opened room for the provision of support to domestic investment and consumption, without jeopardising the projected downward public debt trajectory in the medium run or triggering any major inflationary pressures. under the latest data, the share of central government public debt is at a level only slightly above 50 % of gdp. in the remainder of the conference, we shall present macroeconomic developments and our new projections in more detail. * * * as usual, we shall first elaborate on developments in the international environment, as they largely determine both domestic macroeconomic trends and our monetary policy decisions. at the very start, i wish to underscore that the risks to macroeconomic projections associated with the international environment are now weaker than three, six or nine months ago, but there is still higher probability that they may be detrimental to domestic developments. consistent with expectations, global economic growth has slowed this year, on the back of pronounced geopolitical tensions, relatively high inflation and tight global financial conditions. the negative effect of these factors was partly offset by a better situation concerning global supply chains and a preserved labour market, wherefore the imf ’ s global growth estimates are somewhat more favourable than three months ago. the euro area growth, as the most important for our economy, was also slightly adjusted upwards, but will be led mainly by service sectors and, to a lesser extent, production sectors, with a mild recession projected for germany. 2 of 10 chart 2 world food

- on - year inflation measured 12. 9 %. in less than one year we brought it down to 2. 2 % and preserved it at an average of 2. 0 % in the next five years. since that time inflation in serbia hovered at a level recorded in european countries, equalling 2. 4 % in july. the intention to maintain, in the period to come, what has been achieved is also affirmed by our decision to lower the inflation target from 4±1. 5 % to 3±1. 5 % as of the beginning of 2017. low inflationary pressures reflected primarily adequate monetary policy measures that were fully coordinated with fiscal policy, and this was also at the core of anchoring inflation expectations. today the financial and corporate sectors expect inflation to be maintained at a low level, as they have done for almost five years, since this brings certainty to their business and planning. chart 1 low and stable inflation ( y - o - y rates, in % ) chart 2 anchored one - year ahead inflation expectations ( y - o - y rates, in % ) july 2018. 3. 0 % financial sector ( bloomberg ) 2. 8 % 2. 7 % corporate sector ( ipsos ) financial sector ( ipsos ) average 8. 7 % 6. 4 % average 2. 1 % 2. 0 % sources : sors and nbs calculation. july 2018 2. 4 % 0. 9 % headline inflation core inflation sources : gallup, ipsos / ninamedia, bloomberg and nbs. relative stability of the dinar exchange rate has been preserved and the country's foreign exchange reserves have increased. in the last six years we have also maintained relative stability of the exchange rate – the dinar gained 0. 5 % against the euro. it should be noted that relative stability has been preserved despite strong turbulences in the international environment – brexit, fed ’ s monetary policy normalisation, trade and geopolitical tensions, crisis in some eu countries, asian stock market meltdown in early 2016, etc. ). we have carefully assessed the intensity and type of pressures in the foreign exchange market and intervened impartially in both directions. improvement in domestic macroeconomic indicators and the strengthening of the resilience of the domestic economy to shocks from the international environment shifted the focus toward purchase side interventions, especially during the last two years. as a result, the country ’ s foreign exchange reserves gained eur 1. 1 billion on this account, and now