goods. robust growth in imports of equipment and intermediate goods in the fourth quarter was the main reason for the higher than expected current account deficit in 2011, which came at 9. 1 % of gdp. on the side of exports, growth was driven mainly by processed food and chemical products, while exports of agricultural products were on the decline in the fourth quarter, due primarily to low river levels, river flows being a major route for the agricultural products exports. bis central bankers ’ speeches chart 9 exports and imports ( in eur mln ) chart 10 imports by key components ( seasonally - adjusted data, 2008 = 100 ) 1. 600 1. 400 1. 200 imports 1. 000 exports iii iv 12 2 4 6 8 10 12 2 4 6 8 10 12 2 4 6 8 10 12 2 4 6 8 10 12 original data trend - cycle seasonally - adjusted data i ii iii iv i capital goods ii iii iv i ii iii iv i intermediate goods ii iii iv consumer goods private investment was the key driver of the 1. 9 % gdp growth in 2011. at the same time, personal consumption declined, and net exports gave a neutral contribution. chart 11 gdp growth projection ( y - o - y rates, in % ) chart 12 contributions to y - o - y gdp growth * ( in p. p. ) 9. 3 4. 3 2. 5 5. 4 3. 6 5. 4 3. 8 1. 0 1. 9 0. 5 - 1 - 4 - 7 - 1 - 10 - 2 - 13 - 3 - 16 - 4 iv i ii iii iv i ii iii iv i ii iii iv i ii iii iv - 3. 5 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 net exports government investment * * * nbs estimate. consumption * * including change in stocks. gdp ( % ) the deteriorated growth outlook of our key foreign trade partners and smederevo steel factory ( ex us steel ) losing its private owner were the key reasons behind the national bank of serbia ’ s downward revision of the gdp growth forecast for 2012 to 0. 5 % from 1. 5 %. as a reminder, the gdp growth projection in the november inflation report assumed economic stagnation in the euro area in 2012, but implied higher downside risks due to the assessment of a significant probability of the euro area ’ s slipping into recession. the new gdp growth projection assumes a recession, i. e. a 0. 5 % fall in economic activity

rates. the first condition is that the governing council “ sees inflation reaching two per cent well ahead of the end of its projection horizon. ” the second condition is that the two per cent target is reached “ durably for the rest of the projection horizon ”. the third condition is that the governing council “ judges that realised progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at two per cent over the medium term. ” 3 with regard to temporarily - high inflation, the requirement that we need to see inflation reaching 2 / 4 bis central bankers'speeches two per cent not only “ well ahead of the end of our projection horizon ” but also “ durably for the rest of the projection horizon ” ensures that interest rate policy will not react to inflation shocks that are expected to fade away before the end of our projection horizon ( which will include 2024 in the december round ). moreover, the condition that “ realised progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at two per cent over the medium term ” serves an important purpose in our analysis of the incoming data : it sharply differentiates between the volatile components of headline inflation and the dynamics of underlying inflation, which is the persistent component that is the best guide to medium - term inflation dynamics. in assessing underlying inflation, it is critically important to filter out the temporary impact of base effects and bottlenecks on goods inflation and services inflation. the persistent component in wage dynamics will be central in the assessment of underlying inflation, especially in view of the high share of services in the overall price level and the high share of labour in services value added. accordingly, tracking wage outcomes – adjusted for productivity – and differentiating between transitory and persistent components in wage settlements will be pivotal in assessing progress in the realised path of underlying inflation. in particular, a one - off shift in the level of wages as part of the adjustment to a transitory unexpected increase in the price level does not imply a trend shift in the path of underlying inflation. in addition to rate forward guidance, the calibration of asset purchases also plays a major role in ensuring that the monetary stance is sufficiently accommodative to deliver the timely attainment of our medium - term two per cent target. in particular, the compression of term premia through the duration extraction channel is quantitatively - significant in determining longer - term yields and ensuring that financing conditions are sufficiently supportive to be consistent with the delivery of our medium - term inflation