Fast vaccination of Serbia's population to drive economic rebound

Fast vaccination of Serbia's population to drive economic rebound
/ NBS.rs
By bne IntelliNews February 13, 2021

Serbia’s industrial production, retail trade turnover and exports have already reached pre-crisis levels and other service sectors are expected to completely recover as the country continues with the vaccination process, Serbia's central bank, the National Bank of Serbia (NBS), said on February 11. 

Serbia has one of the fastest vaccination rates in the world, having sourced coronavirus (COVID-19) vaccines from Russia and China as well as buying them from Pfizer. This has meant that while some countries in the region have yet to receive their first vaccine doses, Serbia has vaccinated more of its population than any European country except the UK. 

The rebound in domestic demand will be supported by the continued implementation of infrastructure projects, favourable financing conditions as a result of past monetary policy easing, as well as the maintenance of the labour market in the face of the pandemic, the central bank said.

The NBS noted that quick vaccination of the population will support the recovery when announcing that it will keep its key policy rate at 1.0%. In making the decision, the executive board was guided primarily by the continued stimulating effect of the previously adopted monetary and fiscal policy measures and by the announcement of an additional package of fiscal measures.

This means that co-ordinated monetary and fiscal policy measures will continue to have a positive effect on the financing conditions for corporates and households and on their disposable income.

Strong support by the NBS and government to corporates and households will ensure the attainment of the pre-crisis level of economic activity in Q2, announced NBS.

The resilience of the labour market and the significance of the package of economic measures are evidenced by the rising employment and the single-digit unemployment rate maintained during the pandemic. In the board’s view the announced fiscal package will provide an additional impetus to domestic demand and economic recovery.

Apart from this, the FDI inflow to Serbia of €3.0bn in 2020 was the highest in the region and mostly channelled to tradable sectors, which should, along with the expected rebound in external demand, lead to the double-digit growth in exports this year.

“We have entered the eighth consecutive year of inflation being low, stable and firmly under control,” said the NBS. According to the NBS’ projection, year-on-year inflation will move in the lower half of the target tolerance band until the end of the projection horizon.

Its moderate rise in the short run will result primarily from the expected increase in the prices of electricity and petroleum products on account of the higher global oil price.

The ensured relative stability of the exchange rate and anchored inflation expectations of the financial and corporate sectors remain an important pillar of low and stable inflation.

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