exchange rate, even without the national bank of serbia ’ s interventions in the foreign exchange market. together with high demand for the first issue of the republic of serbia ’ s eurobonds, the prior indicates that serbia ’ s financial resilience to bis central bankers ’ speeches external shocks of this kind is greater than in previous years. the stability of the dinar was underpinned largely by the inflow of foreign direct investments, as well as by the conclusion of a precautionary arrangement with the international monetary fund. chart 3 risk premium indicator − embi by country ( daily, in basis points ) chart 4 movements in exchange rates of national currencies against the euro * ( september 30, 2010 = 100 ) bulgaria serbia embi global composite hungary poland croatia turkey turkey poland czech republic hungary romania serbia * growth indicates appreciation. the government ’ s commitment under the arrangement to run a sustainable fiscal policy lessens the risk of a public debt crisis in serbia, which is of paramount importance in light of the forthcoming parliamentary and local elections. in an environment of a global collapse of confidence in public finance sustainability, the perception of serbia ’ s risk will depend most on the sustainability of its budgetary framework. * * * the slowing of global growth over the previous two quarters, and notably that of the euro area, has already reflected on the serbian economy. according to preliminary estimates, in the third quarter gdp rose 0. 7 % year - on - year and fell 0. 4 % quarter - on - quarter. the fall in economic activity in the third quarter is for its major part due to the reduced final consumption of households. chart 5 economic activity indicators ( seasonally - adjusted data, 2008 = 100 ) chart 6 contributions to quarterly gdp growth ( in p. p. ) 2. 4 - 2 0. 5 0. 5 0. 5 1. 4 - 0. 7 - 1. 0 - 0. 7 - 1. 4 - 1. 2 - 1. 0 1. 2 - 0. 7 - 0. 5 - 0. 4 - 0. 5 - 4 - 6 iii iv i ii gdp * nbs estimate. 4. 1 iii iv i ii iii iv i ii iii iv i non - agricultural value added ii iii 2011 * - 8 iii iv i ii iii iv i ii iii iv total final consumption net exports i ii iii iv i ii iii 2011 * investment gdp ( % ) * nbs estimate. bis central bankers ’ speeches chart 7 retail trade (

of wheat and corn prices, a rise in processed food prices in the coming period will probably be modest. chart 17 world prices of primary commodities ( 2010 = 100 ) chart 18 one - year ahead expected and targeted inflation ( in % ) 7. 4 6. 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 10 ural oil prices corn prices wheat prices copper prices 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 financial sector ( gallup and strategic agency ) financial sector ( thomson reuters agency ) financial sector ( bloomberg ) targeted inflation tolerance band declining world prices of other primary commodities, such as oil and base metals will also work towards the disinflatory effect. furthermore, we expect administered price growth to be slower in 2012 than in this and earlier years, though we may see another departure from the planned level. the disinflation process will be further fuelled by declining inflation expectations. inflation expectations declined from some 8. 0 % to 6. 7 % in the last two months, and we expect this tendency to continue. a fall in year - on - year inflation will be particularly pronounced until march – april next year as a result of the base effect. namely, although monthly inflation rates have decreased over the last six months to levels consistent with the target, the year - on - year rate remains above the target as price hikes from late 2010 and early 2011 are still included in its calculation. as these price hikes phase out of the year - on - year calculation and new, lower monthly inflation rates are taken in, year - on - year inflation will decline and return within the target band. chart 19 short - term inflation projection ( y - o - y rates, in % ) chart 20 inflation projection ( y - o - y rates, in % ) projection 12 3 12 3 12 3 12 3 the key risks to the presented inflation projection are largely associated with movements in the international environment and fiscal policy at home. bis central bankers ’ speeches world analysts agree in the assessment that global growth will be slower than expected until recently, but there is a large difference across individual forecasts. if, contrary to the currently prevailing expectations, the world economy is swept by a new wave of recession, negative repercussions for the serbian economy, and the disinflationary effects arising from aggregate demand, would be more pronounced than