by the interest rates on new corporate and household loans, which in q3 moved close to the lowest levels recorded in the past months. better financing conditions are a result of monetary policy easing, lower country risk premium, increased competition and persistently low interest rates in the international money market. in nearly all of these segments we can recognise the importance of domestic factors – primarily of macroeconomic stability, which reflects well - coordinated monetary and fiscal policies. in such conditions, economic growth, accompanied with labour market recovery, contributes to the further increase in lending activity. in september, the y - o - y growth in total domestic loans accelerated to 7. 7 % excluding the effect of exchange rate changes. this credit growth was recorded against the background of continued efforts to resolve npls which led to their significant write - off and sale to non - banking sector entities, supporting the investment upswing and the acceleration of economic growth. chart 4 falling borrowing costs supported lending activity chart 3 interest rates on dinar loans are close to minimum ( annual level, in % ) ( at constant exchange rate as at 30 sept. 2014, y - o - y rates, in % ) 20. 6 16. 4 11. 9 10. 2 5. 05 7. 7 - 5 - 10 non - financial corporations - new business households - new business non - financial corporations - outstanding amounts households - outstanding amounts key policy rate source : nbs. - 15 total domestic loans total domestic loans * source : nbs. * excluding the effect of npl write - off and sale since early 2016. implementation of the npl resolution strategy continues to yield excellent results. in slightly more than three years since the adoption of the npl resolution strategy the amount of npls was slashed by over 67 %. at the same time, their share in total loans was cut by close to 16 pp, to 6. 4 % in september which is their lowest level since 2008 when the monitoring of this indicator of bank asset quality began. owing to the considerable drop in the npl ratio, high capital adequacy of banks and better access to smes financing, serbia made a significant progress in the international competitiveness list of the world economic forum for 2018, as judged by the financial system indicators. chart 6 high capitalisation of the banking sector chart 5 npl share fell to its lowest level ( in % ) ( gross principle, in rsd bn ) ( in % ) 22. 8 21. 9 21. 8 21. 4 21

restricted national bank of serbia vice - governor ’ s opening remarks at the presentation of the inflation report – november 2018 dr zeljko jovic, vice - governor belgrade, 16 november 2018 ladies and gentlemen, esteemed members of the press, dear colleagues, welcome to the presentation of the november inflation report. we will give you an overview of monetary and macroeconomic trends since the previous report and set out our expectations for the period ahead. at the very beginning i would like to stress that since the august report macroeconomic indicators have remained favourable, while macroeconomic outlook marked an additional improvement. economic growth has accelerated, inflation is at a low and stable level, relative exchange rate stability has been preserved and inflationary pressures have remained low in the face of strong economic growth. this is primarily a result of joint efforts of all economic policy makers aimed at laying the groundwork for sound and sustainable economic progress. of particular importance is the fact that our country is recording good results even though the international environment continues to be plagued by a high degree of uncertainty. volatility in the commodity markets persists due to volatile prices of oil and other primary commodities, as well as in the financial market amid different dynamics of monetary policy normalisation of the fed and the ecb. geopolitical tensions and rising protectionism in the relations between leading economic powers are an additional source of instability. such global market developments also reflect on the slower than expected growth of the euro area, our most significant economic partner. however, since policies in serbia are fully coordinated, internal and external imbalances narrowed down and macroeconomic prospects improved, strengthening the resilience of our economy to external uncertainties. the importance of increased resilience is practically visible. namely, this year serbia recorded the fastest growth in the last ten years despite adverse external conditions. in the past three quarters gdp growth reached 4. 5 % y - o - y. acknowledging this fact and a faster than expected rise in investment, we revised the gdp growth projection for this year upward from 4 % to 4. 2 %. serbia ’ s growth projections were upgraded by all relevant international financial institutions, too – the international monetary fund, the european commission, some rating agencies and many economic analysts who monitor developments in our country. based on the results of the achieved macroeconomic stability and implemented structural reforms, we expect similar growth dynamics in the medium term, as well. the benefits of this economic progress are also felt more by our citizens. wages and pensions are rising on