SOSKIC: No reason for new price shocks

(Dejan Soskic)

Governor of the National Bank of Serbia Dejan Soskic said yesterday that there was no reason for instability of foreign currency exchange rate and new price shocks. He announced that the price stabilization would be discussed the next week with the representatives of the Government.

Soskic said at the Forum of Serbian Association of Managers that fluctuations in the foreign currency exchange rate were expected in the system of floating exchange rate conducted by the NBS and that the central bank had mechanisms such as foreign currency reserves to prevent bigger fluctuations in the value of Dinar against the leading western currencies.

According to his words, although they are now smaller, Serbia still has enough foreign currency reserves. He reminded that, concerning the fact that only part of the funds had been withdrawn to date, our country was still able to withdraw a new tranche at any moment and, thus, increase the reserves.

He denied the writings of certain media that the planning of a framework for the inflation in 2011 was discussed during the talks with the IMF Mission.

- The aim of the NBS is not an one-digit inflation but a low one-digit inflation, as well as to avoid the transfer of influence of the change in foreign currency exchange rate on the inflation and vice versa - said Soskic.

Soskic announced that the NBS would provide incentives for saving deposits in RSD and use all the measures it can to return the trust in the national currency in order to stabilize the prices and macroeconomic size.

Answering the questions of numerous managers about the possibility of introduction of Euro as a monetary unit, Soskic warned that unilateral introduction of Euro, without the consent and agreement with the European Central Bank, would have not only economic, but also political consequences.

The Governor of the NBS explained that Serbia could not count on the good will of European monetary authorities, especially not after the crisis, and cited the example of Greece where a danger to the stability of the European monetary union occurred because of that country's large public debts.

According to the Governor's words, Serbia should provide a larger inflow of direct foreign investments in a long run in order to stimulate the production for export.

That would, as he explained, have a positive effect on the growth of overall economy and standard of citizens and it would also reduce the deficit of current payment balance.

According to his words, the sale of Telekom Srbija may only stabilize the foreign currency exchange rate for a short time, while the long-term stabilization requires a higher competitiveness of the domestic economy, which would contribute to the growth of export and the attracting of direct foreign investments.

No new price shocks

The Governor of the National Bank of Serbia said that one-off price shocks, one of which was the latest increase in the price of food, were eliminated over time, as a rule, and that he did not expect them to appear again and affect the inflation in 2011.

Soskic announced that the mechanisms for avoiding such shocks would be discussed the next week with the representatives of the Government.

He said that the intention of the central bank was to determine measures, in the talks with the representatives of the Government, that would enable better competition and supply of goods to the market in case of unjustified increases in the prices of food.