radovan jelasic : recent economic and financial developments in serbia speech by mr radovan jelasic, governor of the national bank of serbia, at the first presentation of inflation report to the economic and financial community, belgrade, 25 february 2008. * * * during the past week, instead of the usual eur 3 million purchased from exchange dealers, the national bank of serbia sold eur 10 million a day in the ifem for one reason only – to boost the forex market trading volumes. namely, last week ’ s trading volumes in the ifem were five times lower than usual, despite central bank ’ s interventions, and the market - based exchange rates were threatened by the widened spread between the quoted buying and selling exchange rates. however, i would like to point out that the aim of these interventions by the national bank was not to defend the level of the exchange rate, because had this been the case, the nbs would have organized fixing sessions and asked banks to specify the affordable buying or selling exchange rate. owing to the central bank ’ s intervention, the market was revived by friday afternoon when trading volume reached eur 73. 3 million, triple the amount recorded on wednesday or thursday. as foreign exchange trading by banks is performed on behalf of their clients, the decline in trading volumes confirms that all market players apprehensive of future events exercised increased caution and restraint. the national bank of serbia will closely monitor movements in the forex market, and will reduce the volume of its interventions to the amount of its daily purchase of foreign exchange from licensed exchange dealers once normal liquidity conditions are restored. as regards the labeling of banks based on their ownership structure, i repeat once again that all banks operating in our banking system are serbian banks, irrespective of the origin of their capital. whether domestic or foreign, the capital was invested in our country, and placed at the disposal of our enterprises and households. the shareholders of parent companies of banks with majority foreign owned capital are not necessarily nationals of those countries in which parent companies are located. these misconceptions show a lack of understanding of the principles of modern financial flows which know no boundaries. to illustrate, one of the largest shareholders of morgan stanley holding a 9. 9 percent stake is the chinese government investment fund, and the most significant ownership stakes in citibank belong to middle east investors. both oviesse and benetton are selling sweaters made in albania and turkey … specifying ethnic background

. ladies and gentlemen, dear colleagues, in the remainder, i shall give a more detailed overview of the factors from the international environment which will dictate inflation and economic movements going forward, and by extension affect our future decision - making. firstly, it is important to note that global inflation is retreating faster than anticipated and is approaching pre - pandemic levels, thanks to the effects of past monetary policy tightening by the majority of central banks. as a result of lower inflation, we can expect leading central banks to start trimming their interest rates, and some inflationtargeting banks in the region have already started this cycle. 7 of 9 still, the imf and other relevant international institutions have warned that central banks should take a cautious approach when deciding to start trimming their rates so as not to give rise to renewed inflationary pressures. we still see pronounced risks that may result in inflation in many countries trending higher than expected and slow down its return to the target. at present, the biggest source of uncertainty is geopolitical tension, which was exacerbated early this year, when the transport of oil and other commodities through the red sea and the suez canal was brought into question. so far, this has not had a major effect on the price of oil and other primary commodities which were lowered due to dampened demand from china, but it did reflect on the cost of overseas transport. due to uncertainty, we did not base the movements in global oil prices solely on oil futures, which indicate a lower level this and the following year than the one currently held. when formulating the assumptions to our projection, we took into account the projections of relevant international institutions which expect the global oil price to move between usd 80 and usd 83 per barrel. we note that our new assumptions on the global price of oil are lower than the ones stated in the november projection. chart 13 adjustments to the euro area ’ s gdp growth projection for 2024 and 2025 chart 14 revision of the euro area inflation projection for 2024 and 2025 ( in % ) ( in % ) 2. 5 2. 0 estimate for 2023 new projection for 2024 new projection for 2025 previous projection for 2024 previous projection for 2025 estimate for 2023 new projection for 2024 new projection for 2025 previous projection for 2024 previous projection for 2025 1. 5 1. 0 0. 5 0. 0 ecb consensus economics world bank imf sources : ecb ( september and december )