SOME ELEMENTS OF COMPETITIVENESS OF THE ECONOMY OF SERBIA NBRM Conference, Skopje , 30 May 2008
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Transcript of SOME ELEMENTS OF COMPETITIVENESS OF THE ECONOMY OF SERBIA NBRM Conference, Skopje , 30 May 2008
SOME ELEMENTS OF COMPETITIVENESS SOME ELEMENTS OF COMPETITIVENESS OF THE ECONOMY OF SERBIAOF THE ECONOMY OF SERBIA
NBRM Conference, SkopjeNBRM Conference, Skopje, , 30 May 30 May 20082008
Branko Hinić and Milan Šojić, National Bank of Serbia
Economic Analysis and Research Department
ContentsContents
Memorandum of the NBS on Setting Inflation Objectives for
2009 and 2010
Medium-term core inflation objectives
Core inflation projection
World Economic Form - Global Competiveness Index for
Serbia
Investing in Serbia
Memorandum of the National Bank of Serbia on Setting Memorandum of the National Bank of Serbia on Setting Inflation Objectives for the Years Inflation Objectives for the Years 20092009 and and 20102010
Linearly declining band of core RPI year-on-year inflation rates with
the following parameters:
2009 starting level:
a range of 3.0% - 6.0% with a midpoint of 4.5 %
2009 end level and 2010 starting level:
a range of 2.5% - 5.5% with a midpoint of 4.0%;
2010 end level:
a range of 2.0% - 5.0% with a midpoint of 3.5%.
Medium-term core inflation objectivesMedium-term core inflation objectives
Medium -term core inflation objectives (y ear-on-y ear growth rates, in %)
0
1
2
3
4
5
6
7
8
9
10
IV
2006
I II III IV
2007
I II III IV
2008
I II III IV
2009
I II III IV
2010
Objectiv e f or 2007 4-8%
Objective for 2008 3-6%
Objective for 2006 7-9%
Objective for 2009 2.5-5.5%
Objective for 2010 2-5%
Projected core inflation (y ear-on-y ear rates, in %)
0
1
2
3
4
5
6
7
8
9
10
II III IV
2007
I II III IV
2008
I II III IV
2009
Objective for 2008 3-6%
Objective for 2009 2.5-5.5%
Objective for 2007 4-8%
Core inflation projectionCore inflation projection
Dinar exchange rate and foreign exchange marketDinar exchange rate and foreign exchange market
Non-economic factors had a strong impact on foreign investors’
expectations
Movements in the RSD/EUR exchange rate in 2007 and 2008
76
78
80
82
84
86
Jan2007
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan2008
Feb Mar Apr
80,76
79,66
79,96
78,19
RSD/EUR
76,81
78,89
84,75
77,20
84, 68
77,89
80,30
78,51 78,6
79,90
81,57
80,00
81,38
79,58
82,98
80,78
81,88
79,03
81,82
78,67
82,99
79,76
83,83
81,44
1-20May
83,70
82,02
82,26
79,70
83,87
80,66
...... in Q1 2008, in Q1 2008, quarterly quarterly core inflationcore inflation slowed down slowed down!!
In Q1, core inflation (7.7%, y-o-y) was above the upper bound of the target range in line
with expectations, despite the decline in its quarterly growth rate in Q1 (1.5%) relative to
Q3 and Q4 2007 (2.2%);
In Q1, retail price growth equaled 2.8% (11.8% y-o-y), with regulated prices contributing
1.6 pp.
Retail prices(in %)
11.8
5.6
14.3
11.7
5.1
9.1
0
2
4
6
8
10
12
14
16
I
2006
II III IV I
2007
II III IV I
2008
year-on-year growth quarterly growth, ann.
Core inflation (in %)
11.6
4.0
7.0
7.0
-0.3
5.9
-2
0
2
4
6
8
10
12
14
I2006
II III IV I2007
II III IV I2008
year-on-year growth quarterly growth, ann.
CCore and headline inflation 2001-2007ore and headline inflation 2001-2007
CORE AND HEADLINE INFLATION IN SERBIA
2001-2007
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
2001 2002 2003 2004 2005 2006 2007
Years
In % per annum
Headline inflation
Core inflation
GDP GROWTH RATES 2000-2007GDP GROWTH RATES 2000-2007
GDP- REPUBLIC OF SERBIA Growth rates 2000-2007
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007.
In %
FDI-inward FDI-inward
FDI Stock (2001-2007): $13.5 bn
5. 5. Current account deficit in Serbia and other countriesCurrent account deficit in Serbia and other countries
Current account def icit (% of GDP)
-22
-20
-18
-16
-14
-12
-10
-8
-6
-4
-2
0
2003 2004 2005 2006 2007
Bulgaria
Romania
Slovakia
Serbia
Source: EUROSTAT and central banks' websites.
Slovenia
Croatia
Capital inflows exceeded the current account deficit financing needs in 2007, which
reflects an increase in foreign exchange reserves.
The strongest average increase in foreign exchange reserves in the period 2003-2007 was
recorded for Serbia (7% of GDP).
Changes in central banks' foreign exchange reserves (% of GDP)
-18
-15
-12
-9
-6
-3
0
3
6
2003 2004 2005 2006 2007
Bulgaria
RomaniaSlovakia
Serbia
Note: The minus sign indicates increase in fx reserves and vice versa.
Source: EUROSTAT and central banks' websites.
Slovenia
Croatia
World oil pricesWorld oil prices
World price of Ural oil per barrel (in USD)
115,9
63.1
67.668.8
73.9 73.7
67.571.3
76.4
84,4
90.6 89.093.1
88,8 87.489.4
94,9
101.4100.0
108.2
55
60
65
70
75
80
85
90
95
100
105
110
115
120
May-07
J un J ul Aug
Sep
Oct Nov Dec J an Feb Mar Apr May-08
Average for the period
Annual price growth:
Ural oil 84% (May 2008/May 2007);
Oil derivatives 21.9% (April 2008/April 2007).
Strengthening of the dollar places additional upward pressure on prices of oil derivatives.
In order to boost liquidity in the IFEM, the NBS sold a daily In order to boost liquidity in the IFEM, the NBS sold a daily average ofaverage of EUREUR 4 4..4 4 mln in the year to date mln in the year to date
Purchase/sale of foreign exchange by the NBS in the fixing session and euro exchange rate
-120,000
-100,000
-80,000
-60,000
-40,000
-20,000
0
03
.01
.07
17
.01
.07
31
.01
.07
14
.02
.07
01
.03
.07
15
.03
.07
29
.03
.07
16
.04
.07
30
.04
.07
16
.05
.07
30
.05
.07
13
.06
.07
27
.06
.07
11
.07
.07
25
.07
.07
08
.08
.07
22
.08
.07
05
.09
.07
19
.09
.07
03
.10
.07
17
.10
.07
31
.10
.07
14
.11
.07
28
.11
.07
12
.12
.07
26
.12
.07
14
.01
.08
28
.01
.08
11
.02
.08
26
.02
.08
11
.03
.08
25
.03
.08
08
.04
.08
22
.04
.08
12
.05
.08
(000 EUR)
76
77
78
79
80
81
82
83
84
85RSD/EUR
NBS interventions in IFEM (left scale) Exchange rate (right scale)
No steps have been taken to defend the exchange rate in the fixing session since mid-May 2007;
Since the start of the year, the NBS sold a total of EUR 393 million (outside the fixing session),
compared to EUR 556.7 million sold in the same period a year earlier (in fixing sessions) – 42%
more!
Composition of banking sector trading in the IFEM in 2007 and 2008*
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
J an 2007 Mar May J ul Sep Nov J an Mar 1-16May2008
Bank - bank Banks - NBS
in EUR mln
* NBS sells a portion of foreign exchange purchases from exchange dealers in the IFEM.
Capital marketCapital market
BELEX15 index
0
100
200
300
400
500
600
700
800
900
3/1/08 22/1/08 7/2/08 26/2/08 13/3/08 31/3/08 16/4/08 9/5/08
RSD mln
Source: Belgrade Stock Exchange.
1,500
1,600
1,700
1,800
1,900
2,000
2,100
2,200
2,300
2,400
in index points
Turnover - left scale Value
The impact of non-economic factors and world financial crisis.
World Economic Form-Global Competiveness IndexWorld Economic Form-Global Competiveness Index-2007-2008-2007-2008 Republic of Serbia..... Republic of Serbia..... rank 91rank 91 of 131 of 131 (score 3.78 of 7)(score 3.78 of 7)
Subindex A-Basic requirements......................78
1st pillar- Institutions ..........................................99
2nd pillar-Infrastructure.......................................92
3rd pillar-Macroeconomic Stability.........................88
4th pillar-Health and primary education.................31
Subindex B-Efficiency enhancers....................88
5th pillar-Higher education and training.............82
6tht pillar-Good market efficiency.....................114
7tht pillar-Labour market efficiency...................111
8th pillar-Financial market sofistication.............98
9th pillar-Technological readiness......................57
10th pillar-Market size...........................................75
Subindex C-Innovation and sophistication.....88
11th pillar-Business sophistication....................95
12th pillar-Innovation............................................78
Quality of national business environment......90
World Economic Form-Global Competiveness IndexWorld Economic Form-Global Competiveness Index-2007-2008-2007-2008 BY COUNTRIESBY COUNTRIES
SER B&H Mtng
Mac.FR
Y GR Bull. Rom. AL Cro. Hun. Competitiveness Index WEF 91 106 82 94 65 79 74 109 57 47
Sub index A-Basic requirements 78 104 59 72 48 76 88 99 53 551st pillar- Institutions 99 113 78 102 49 109 94 114 65 542nd pillar-Infrastructure 92 117 90 85 35 84 100 128 53 543rd pillar-Macroeconomic Stability 88 90 33 53 106 47 84 79 73 1074th pillar-Health and primary education 31 87 33 47 42 56 52 65 44 41Sub index B-Efficiency enhancers 88 95 87 98 57 72 62 105 61 405th pillar-Higher education and training 82 98 79 75 39 66 54 103 46 336tht pillar-Good market efficiency 114 113 91 98 60 90 74 117 71 597tht pillar-Labour market efficiency 111 77 52 112 120 73 85 88 56 588th pillar-Financial market sofistication 98 71 43 83 60 74 78 103 68 519th pillar-Technological readiness 57 110 48 90 58 65 59 74 49 4110th pillar-Market size 75 80 130 106 39 61 43 107 64 41Sub index C-Innovat.and sophistication 88 123 97 101 59 91 73 125 53 4311th pillar-Business sophistication 95 119 90 108 62 92 73 109 64 4612th pillar-Innovation 78 121 104 92 63 88 76 131 50 37Quality of nation. business environment 90 105 80 96 52 77 74 122 61 46
Republic of SerbiaRepublic of Serbia -- c comparative advantomparative advantaagesges
Investment Incentives
State grants in the range between €2,000 and €10,000 per every new job created and tax incentives now available.
Quality Human Resources
Skilled and productive labor force- one of the major competitive advantages.
Strategic Geographic Location
You can effectively serve your European and Middle Eastern customers
Low Operating Costs
Attractive tax environmentAttractive tax environment - corporate profit tax rate 10% and other benefits.
Lowest individual income tax- 12%
Total monthly labor costs EUR 550 (April 2008)
Locate Business
Property Database
Republic of SerbiaRepublic of Serbia - - market accessmarket access
Duty free exports to the EU
FTA with Russian Federation - market of 150 million
people
CEFTA – duty free access to 30 million people
market (CEFTA agreement signed in 2007)
WTO accession expected in 2008
Republic of SerbiaRepublic of Serbia - investment factors - investment factors
Continuous macroeconomic stability (GDP growth, budget balance,
relatively low public debt to GDP, core inflation - new monetary
framework)
Market access and market potential
Valuable human capital
Attractive tax environment
Government incentives
Law of Concessions/ free zones incentives / BOT-investments, etc...
FDI growth
Republic of Serbia- Republic of Serbia- Number of graduated students from universities in Serbia
Base of young, educated, skilled and committed workforce
Source: SIEPA
FOREIGN DEBT 2000-2007 FOREIGN DEBT 2000-2007
FOREIGN DEBT
0
5000
10000
15000
20000
25000
30000
$ m
ln
Foreign exchange reservesForeign exchange reserves
FOREIGN EXCHANGE RESERVES
2001-2007
0,0
2.000,0
4.000,06.000,0
8.000,0
10.000,0
12.000,014.000,0
16.000,0
18.000,0
2001 2002 2003 2004 2005 2006 2007
$ m
ln.
NBS Banks Total
Republic of Serbia- Favorable investment regime Republic of Serbia- Favorable investment regime
Republic of Serbia- Republic of Serbia- Financial incentivesFinancial incentives
Non-refundable funds for investments in all sectors, except agriculture, tourism, hospitality and trade
Investment projects rated based on the evaluation criteria : investors reference; participation of domestic suppliers; effects on R&D, HR etc.
Republic of Serbia- Republic of Serbia- MMajor Foreign Investors ajor Foreign Investors
MONETARY AND MACROECONOMIC RESULTS IN REPUBLIC OF SERBIA
WIDE-RANGING ECONOMIC REFORMS (FISCAL REFORM, NEW BANKS,
OWNERSHIP RIGHTS, GOVERNANCE REFORM, etc.)
MACROECONOMIC STABILITY
CORE INFLATION ONE DIGIT LEVEL WITH DECREASING TREND
GROWING FOREIGN CURRENCY RESERVES
GROWING FX SAVINGS DEPOSITS OF CITIZENS
ENHANCED РRIVATIZATION PROCESS, BUT ALSO:
РROBLEMS: UNEMPLOYMENT, AS WELL AS TRADE BALANCE DEFICIT
Thank you for your attention!