Twelve years of Jorgovanka Tabaković’s governorship – continuity in the fulfilment of objectives to the benefit of citizens, businesses and the government

In the past twelve years, Serbia’s economic landscape has been fundamentally transformed. Serbia today is a country whose inflation is comparable to that of central European countries. It has a stable currency, a record high level of FX reserves, a stable financial system, orderly public finances, robust investment growth, vibrant exports and a sustainable external position. It is a country half a step away from obtaining an investment grade.

RESULTS

• High inflation inherited in late 2012 was cut to 2.2% within a year. By running adequate monetary policy, we lowered inflation by 10 pp – from 12.2% at end-2012 to 2.2% at end-2013. Over the following eight years, until global inflationary pressures escalated in 2021, average inflation in Serbia has been kept at 2.2%.
• While in 2009–2013 it was 4.9 pp higher than in central European countries, in the period thereafter average inflation in Serbia equalised with that in central Europe.
• We responded jointly – the NBS and the Serbian Government – to imported inflation, generated by a global polycrisis. We invested utmost effort to protect the citizens’ living standard, without jeopardising economic growth. The record, 93.5% coverage of the average consumer basket by average wage in the five months of 2024 vs. 65.9% in 2013, and of the minimum consumer basket by minimum wage of 88.9% vs. 58.7% in 2013, best confirm the growth in our citizens’ living standard in the past twelve years, despite the period of pronounced global negative macroeconomic shocks.
• The established and preserved relative stability of the dinar exchange rate against the euro in the past twelve years has become the NBS’s trademark – in this period, the dinar gained 1.3% in nominal terms. We bought almost EUR 10 bn net in the FX market, this being the largest individual factor behind the increase in the country’s FX reserves.
• Amid prevailing supply-side pressures, by purchasing foreign currency the NBS has prevented dinar’s excessive appreciation during seven of the past eight years. In 2023, we bought a record high level of foreign currency, worth almost EUR 4 bn net, and over EUR 1.6 bn in 2024. We are thus boosting our FX reserves, i.e. further reinforcing one of the pillars of financial stability at home.
• FX reserves are recording new historical highs. At end-July 2024, gross FX reserves stood at EUR 28.1 bn, up by EUR 18 bn or 2.8 times more compared to end-July 2012, despite the unprecedented global mayhem. We also increased our net FX reserves by over four times – from EUR 5.5 bn to EUR 23.9 bn.
• Since August 2012, we have significantly increased the quantity, value and share of gold in FX reserves:
  • The quantity of gold has been increased by over three times – from 14.8 tonnes in late July 2012 to the current, record high level of 46.7 tonnes;
  • The value of gold reserves has increased five and a half times – from EUR 0.6 bn to EUR 3.4 bn;
  • The share of gold in reserves is doubled from around 6% to around 12%.
• Dinar savings have also touched their record high levels – at almost RSD 165 bn, dinar savings are by more than nine times higher compared to end-2012. Such growth is a concrete confirmation of citizens’ confidence in the stability of the domestic banking sector and the credibility of the domestic currency.
• FX savings are also at their record highs – at over EUR 15 bn, they have increased by more than 80% in the past twelve years.
• Owing to achieved and preserved price stability, we enjoyed low interest rates on dinar loans for a number of years – the reduction in the key policy rate from inherited 11.75% in 2012 to 1% in late 2020 translated into much more favourable terms of corporate and household borrowing.
• Interest rates on new dinar corporate and household loans are today by around 9 and 10 pp lower than at end-2012, despite the monetary tightening cycle in the current global inflationary wave.
• By preserving relative stability of the exchange rate and easing monetary policy, we directly contributed to the more favourable corporate financial result through a reduction in exchange rate losses and lower interest expenses, against the backdrop of a rise in lending. Corporate net financial profit amounted to RSD 972 bn in 2023, vs. the loss of RSD 31 bn in 2013.
• We lowered the NPL share in total banking sector loans to below 3% (2.94% in June 2024), from the inherited level of around 20% (a fifth of banking sector assets).
• Amid a sudden and significant rise in EURIBOR rates and given that 99% of housing loans are euro-indexed, with almost 85% of those loans contracted at a variable interest rate, in September 2023 the NBS temporarily capped interest rates on euro housing loans. On this account, the rates on housing loans were lowered by 2 pp on average, and loan instalments were reduced by 10% to over 25%.
• Owing to the introduction of numerous new services as competition to expensive foreign brands, the turnover with DinaCards is on the rise, whereby we halved the average charged merchant fee from 2.10% to 1.05%. Based on this only, and in a five-year period alone (2019–2023), savings in the trading system amounted to close to EUR 300 mn, which is at the same time the cost that would be passed on to buyers through the prices of goods and services.
• Owing to the measures we have adopted since 2013, loan users were paid back the unjustifiably charged interest that was unilaterally changed by banks in the amount of RSD 2.92 bn, which, along with the return of the unjustifiably charged interest based on the NBS’s recommendation from 2013, amounts to total RSD 5.12 bn.
• With the application of the same type of the exchange rate during loan disbursement and repayment, around EUR 51.9 mn have been saved for users so far.
• We have resolved a long-standing issue of charging travel packages under banks’ selling exchange rates for foreign currency or foreign cash. Since end-July 2019, the official middle exchange rate of the dinar has been applied when advertising the price and charging travel packages abroad. Before this, the exchange rate drastically deviated from the middle exchange rate, significantly increasing the price of travel packages.
• We limited the lowest buying and the highest selling exchange rate that authorised exchange dealers and the public postal operator can apply when purchasing and selling foreign cash – euros, to ±1.25% relative to the official middle exchange rate of the dinar against the euro applicable on a concrete day, and the exchange fee is capped to 1%.
• Goods and services exports expanded by almost four times – from EUR 11.5 bn in 2012 to EUR 41.0 bn in 2023.
• During the last 12 years, the FDI inflow amounted to EUR 34 bn, with a record inflow of EUR 4.5 bn registered in 2023. This means new jobs and regular wages for our citizens, our country’s full budget, stable and smooth functioning of our educational, health, security and all other government systems.
• Serbia’s credit rating was upgraded by two notches, despite the international crises, and is now half a step away from investment grade. The most important international investors say that Serbia is one of three key markets that they are currently monitoring and that they already consider Serbia an investment-grade country.

In January 2020, based on the voting of leading world bankers and economists, the London-based monthly “The Banker” declared Governor Jorgovanka Tabaković the best governor globally and in Europe, recognising her contribution to the growth and stabilisation of the Serbian economy. “Though it is personal, I take this award as a recognition of changes in Serbia, on which I have been working since the second half of 2012 together with my associates, and as a recognition of changes that the Serbian President has been working on together with his associates. This award itself belongs most to Serbia and its citizens. And it was worth it. Serbia today is an example of a country with successful coordination of fiscal and monetary policy measures! Serbia today is a country which the IMF calls a bright spot in Europe and investors consider an investment-grade country”, noted Ms Tabaković.

The NBS was among the first in the world to develop its instant payments system – the NBS IPS system, and launched it in October 2018. It is a state-of-the-art system, operating 24/7/365 and enabling money transfers in a matter of a second. In February 2019, Governor Tabaković got the award for the best online projects in Serbia – the award was granted for the NBS IPS system, which was assessed as a revolutionary project that marked the year 2018 in the area of digitalisation and exceeded all expectations.

The City of Belgrade granted to the NBS the “Hero of Belgrade” award, as it preserved financial stability in Serbia during the covid pandemic with its flawless functioning – reads the statement. “The heroes are all those who behind each decision and procedure see the people for the sake of whom we exist. We have worked just as our payment system has worked – incessantly, just as our hospitals, pharmacies, grocery stores, utility workers, police officers and soldiers have worked – because our motto is: with the people, for the people, for Serbia, whose mirror we are”, highlighted Ms Tabaković.

We reduced average inflation from inherited two-digit levels to 2.2% within less than a year. It stayed around that level until global inflationary pressures escalated.

• By implementing adequate monetary policy measures, within less than a year, we lowered inflation to the level comparable with that in the euro area – from 12.2% in late 2012 to 2.2% in October 2013.
• Owing to the improvement of the country’s macroeconomic position and a more favourable outlook going forward, in November 2016, in cooperation with the Serbian Government, we made the decision to reduce the inflation target from 4% to 3% starting from 2017, while keeping the tolerance band of ±1.5 pp unchanged. By defining a lower target, we confirmed our intention to keep inflation at a low level in the medium run, together with the Government.
• In the course of eight years until 2021 and the escalation of global inflationary pressures, average inflation in Serbia was kept at 2.2%.
• The global polycrisis environment, featuring the pandemic, energy crisis and escalation of international conflicts, made inflation soar globally. Inflation imported to Serbia from the international environment and its different nature entailed a different response both by the Government and the NBS – a response that was continuous, but gradual. We did everything to preserve the citizens’ living standard, without jeopardising financial stability and economic growth. In May 2024, inflation returned within the 3±1.5% target band, in accordance with our projections. The medium-term inflation expectations of the financial sector remained anchored even amid the strongest global inflationary pressures.
• In general, while in 2009–2013 it was 4.9 pp higher than in central European countries, average inflation in Serbia levelled with that in central Europe thereafter.

Relative stability of the dinar exchange rate against the euro is a new normal in Serbia, ensuring the certainty of doing business and planning in the past twelve years.

1. In the past twelve years we have achieved and maintained relative stability of the dinar exchange rate against the euro – the dinar gained 1.3% in nominal terms.
2. Exchange rate stability has become a new normal in Serbia. The approach to running the exchange rate policy changed. Before August 2012, stronger volatility was allowed, which led to the strengthening of inflationary pressures, business uncertainty, high exchange rate differences in the domestic economy and the increase in NPLs, whereas from that time on, one of the basic characteristics of the NBS is the relative stability of the exchange rate of the dinar against the euro.
3. Since the managed floating exchange rate regime was introduced in 2001 until August 2012, the net sale via FX interventions amounted to over EUR 14 bn – FX reserves were thereby spent and, nonetheless, the dinar weakened by more than 50% against the euro. In contrast, since August 2012 to date, the NBS has boosted FX reserves via interventions – cumulative net FX purchases amounted to almost EUR 10 bn, with the dinar gaining 1.3% against the euro nominally.
4. These net purchases in the past twelve years have helped us not only to maintain the relative stability of the exchange rate, but also to contribute to record high FX reserves, which are a guarantee of our economy’s security and stability.

FX reserves are record high and structurally enhanced.

• We boosted FX reserves to historical highs.
• At end-July 2024, gross FX reserves stood at EUR 28.1 bn, up by EUR 18 bn from end-July 2012 (a rise of almost 180%), despite the unprecedented turbulences on a global level.
• Net FX reserves increased more than fourfold – from EUR 5.5 bn to EUR 23.9 bn.
• The growth in FX reserves went in parallel with the strengthening of their composition – we significantly increased the quantity, value and share of gold. Since August 2012 to date, we increased the quantity of gold by over three times (from 14.8 tonnes at end-July 2012 to the current record 46.7 tonnes), through purchases in the international market (a total of 17 tonnes in 2019, 2020 and 2024), as well as from domestic production, all of which being gold of highest quality and purity (over 99.5%).
• Gold’s share in reserves was doubled from around 6% to around 12%, and its value five and a half times (from EUR 0.6 bn to EUR 3.4 bn).
• Since July 2021, after we imported 13 tonnes of gold from abroad (1 tonne remaining from succession and 12 tonnes bought abroad), the major part of gold reserves (41.7 tonnes) is placed in NBS’s vaults, while 5 tonnes bought abroad in early July 2024 are for the time being still placed in NBS’s special account in Bern.

The monetary system has remained stable despite multiple global challenges in the past years, underpinned by our own approach in the conduct of monetary policy.

• In December 2012, the NBS introduced a multiple variable rate method in the conduct of main open market operations, used for withdrawing excess dinar liquidity from the banking sector, on a weekly basis.
• Such a system has made NBS’s monetary framework more flexible and efficient, which proved particularly relevant in an environment of multiple global crises – the pandemic, energy crisis, outbreak of the Ukraine conflict, and a sudden surge in global inflation.
• We responded to global challenges by applying various measures from a broad monetary toolkit, observing at all times the principles of timeliness, calibration and gradualness, leaving enough time for households and corporates to adjust to the changed financial conditions.

Confidence in the central bank has been established – dinar savings posted the most vibrant growth so far, reaching record highs.

1. Compared to end-2012, dinar savings increased more than ninefold, boasting the highest annual growth in 2023 and 2024 (observed since 2001, when data monitoring began). In 2023, dinar savings increased by RSD 41.6 bn (43%), аnd in 2024 to date, by RSD 26.9 bn more (19.5%), measuring record RSD 164.8 bn at end July 2024.
2. The rising dinar savings have boosted dinarisation and monetary policy efficiency – the degree of dinarisation of corporate and household deposits increased since end-2012 from 19.3% to 44.3%.
3. All of this together are concrete confirmations of a greater use of the dinar in our financial system, and thus also the best proof of growing household confidence in the national currency and the central bank.

Terms of financing, both for corporates and households, are much more favourable than twelve years ago.

• Thanks to the maintenance of an environment of low and predictable inflation for a long series of years, NBS’s monetary policy has been in an accommodating cycle continuously for nine years. Low borrowing costs, a sustainable rise in lending, preservation of the value of the dinar and open possibilities for increasing the disposable income provided the best support to economic growth and a rise in employment, in parallel with facilitating planning and investment decisions for corporates and consumption and saving decisions for households.
• Relative to May 2013, when we embarked on a trimming cycle, until 2021, we lowered the key policy rate by 10.75 pp, which significantly lowered the cost of financing for the government, corporates and households.
• Despite the cycle of monetary policy tightening in the current global inflationary wave, interest rates on new dinar corporate and household loans are by some 9 pp and 10 pp lower today than at end-2012.

The business environment is favourable and the financial result of corporates is growing.

• Through maintenance of the relative stability of the exchange rate and monetary policy accommodation, we directly contributed to a more favourable financial result of corporates by lowering exchange rate losses and interest expenses, and notably so, in conditions of lending expansion.
• Thus, the net financial profit of the corporate sector in 2023 equalled RSD 972 bn, with the annual growth of 12.3%, compared to the loss of RSD 31 bn in 2013.
• Thanks to the overall economic policy, in the period of heightened negative global shocks and growth slowdown in the euro area, which is our key trade partner, Serbia ranks high in the list of countries by the speed of economic growth.

Stability of the financial sector has been preserved and reinforced.

Over the past twelve years, the NBS has ensured all the necessary conditions for the stability of the banking sector, which finances domestic economic activity and offers modern financial services.

• Due to operational problems caused by inadequate management and supervision before 2012, in 2012–2014 we were forced to close four banks (Nova Agrobanka, Razvojna banka Vojvodine, Privredna banka Beograd and Universal banka Beograd). This laid the groundwork for restoring full confidence in the banking system, so today, Serbia’s banking system is stable, highly liquid and adequately capitalised, according to all reference criteria.
• A responsible approach of the NBS was confirmed also in 2022, when the issue of Sberbank was addressed amid the escalation of the Ukraine crisis in 2022, when a quick and efficient response, which did not involve spending of public funds, helped to preserve confidence in the Serbian banking sector.
• A confirmation of NBS’s credibility as the supervisor and regulator and foreign investors’ interest in investing in Serbia’s banking system are two greenfield investments from 2014 and 2016 (Mirabank and Bank of China Srbija), which contributed to the diversification of investments in the banking sector and improved economic cooperation with home countries of those investors.
• Thanks to the responsible approach of the NBS, banking sector consolidation was successfully carried out and stability was preserved even in the face of operating changes of some parent banks (e.g. during the “Greek crisis” in 2015). The attractiveness of the domestic banking market is evidenced by the fact that the NBS issued in this period 31 prior consents for acquisition of ownership in banks and ten consents for bank merger by acquisition. The number of banks was reduced from 33 to 20, with continuous enhancement of the quality and scope of services that are provided to households and corporates.
• Continuous improvement of the supervisory practice and regulations, as well as an adequate control of their application, yielded remarkable results. Namely, thanks to the institutional efforts in tackling the issue of NPLs, the share of NPL in total loans of the banking sector was brought to a historical low, measuring 2.94% at end-June 2024.
• Over the past twelve years we have also achieved a significant compliance between our domestic regulatory and supervisory framework in the area of financial services and that of the EU. According to the equivalence decision which the European Commission adopted in December 2019, the Republic of Serbia was included in the list of countries whose supervisory and regulatory requirements for banks are considered equivalent to those in the EU, thus becoming the first non-EU country in the region to be admitted to the list. The equivalence decision came after a systemic reform of the regulatory and supervisory framework for banks carried out by the NBS in the given period.
• In conditions of the pandemic and heightened negative effects of global shocks, the NBS took all the necessary activities and measures within its remit to facilitate the position of households and corporates, preserve stability and preclude further uncertainty.
• Two days after the declaration of the state of emergency in the country, in March 2020 we adopted regulations enabling a 90-day moratorium on the repayment of loan and financial leasing liabilities of corporates and households, and in July 2020 we allowed for an additional moratorium. Over 90% of debtors in the case of the first and over 80% of debtors in the case of the second moratorium used this opportunity, which proves that these measures were well-grounded and timely.
• In December 2020, the NBS prescribed additional measures for the rescheduling and refinancing of liabilities of the pandemic-affected debtors of banks and financial lessors. The facilities were used by over 50 thousand debtors, in the total amount of RSD 111 bn.
• We responded to the economic situation in which some agricultural producers found themselves. In view of the strategic importance of agricultural production for citizens and businesses, in October 2022 the NBS enabled agricultural producers to reschedule their debt with banks and financial lessors. This measure provided for the rescheduling of 6,238 agricultural loans, including loans approved to persons engaging in the purchase and cold storage of fruit (RSD 24.2 bn, ending with June 2023).
• Additional support was also given to citizens in financial distress by enabling banks to extend the repayment term of their cash, consumer and similar loans and thus help them in debt servicing and overcoming the challenges faced. As at end-June 2024, almost 4,500 debtors used the rescheduling of cash, consumer and similar loans in the total amount of nearly RSD 4 bn.
• Having in mind that 99% of housing loans are euro-indexed and almost 85% are contracted at a variable interest rate, in the environment of a sudden and significant rise in EURIBOR rates, in September 2023, we temporarily capped the interest rates on housing loans in euros. Interest rates on housing loans were lowered by 2 pp on average relative to their increased level, while loan annuities were reduced by 10% to more than 25%.
• As of June 2024, banks are required to calculate and maintain the net stable funding ratio in line with the Basel III standards, thus strengthening the bank liquidity structure and further buttressing the stability of the banking sector. The NBS has set up a comprehensive and modern regulatory framework for managing liquidity risk in banks, aligned with the international standards and European regulations – in a manner which also accounts for local specificities.

Easily available insurance services are better tailored to users’ needs.

By supporting the digitalisation of insurance services and improving the supervision of conduct of market participants, the NBS contributed to the improved availability of and increased trust in insurance services. The NBS did this by insisting on better provision of information to clients, by preventing the spread of unfair business practices and requiring prompt and efficient removal of any actions and activities that may have a potentially harmful effect on the rights and interests of insurance service users. The NBS supports innovation and the implementation of new technologies, while at the same time advancing the quality of insurance services.

All relevant parameters in the insurance market displayed a positive trend in the past twelve years, with more than doubled capital, total assets, technical reserves, life and non-life insurance premiums. The premium per capita increased from EUR 75 in 2012 to EUR 199 at end-2023, and the premium to GDP ratio from 1.6% to 1.9%.

The growth in life insurance is particularly important because it clearly shows the willingness of an increasing number of people to opt for these financial services in the long run – the premium rose from RSD 11.9 bn to RSD 30.5 bn.

In the same period, compensation to the insured, i.e. citizens and legal persons, recorded higher growth than that of insurance premium – three times higher settled claims and two and a half times higher premium.

Protection of financial service consumers has been upgraded with significant positive material effects.

We implemented many activities within the new function of financial service consumer protection, which led to significant and direct positive financial effects for consumers.

Based on the Law Amending the Law on the Protection of Financial Service Consumers from 2014:

• The procedure for the protection of consumer rights before the NBS has been improved.
• The NBS was authorised to determine and consequently prohibit unfair business practices and unfair contractual terms. Based on that authorisation, we issued seven decisions, establishing and prohibiting unfair business practices of banks, i.e. unfair contractual terms.
• The implementation of the same type of exchange rate during loan disbursement and repayment is envisaged, helping consumers save around EUR 51.9 bn thus far.

The Decision on Measures for Preserving Stability of the Financial System in the Context of Foreign Currency-Indexed Loans from February 2015:

• Prescribed four modalities to help users of Swiss franc-indexed loans.
• Banks returned to loan beneficiaries around RSD 2.92 bn in respect of charging unjustified interest rates, unilaterally changed by banks. Together with the refund of the unreasonably charged interest based on our recommendation from 2013, this amounts to RSD 5.12 bn.

A more efficient procedure of protecting individual rights of financial service consumers:

• Fifty three decisions imposing fines and/or ordering the removal of irregularities were adopted. The total amount of fines in respect of these decisions amounts to RSD 5.4 mn.
• The direct material effect for consumers from 2020 (when measuring began) ending with 2023, came at RSD 124.8 mn.

Since 2019, the protection of financial service consumers under collective rights has been improved through the reorganisation of supervision in the area of consumer protection:

• Banks were issued 13 written warnings and nine fines were imposed, the total amount of which is RSD 11.9 mn.
• Without formally conducting the procedure, 11 banks were sent notifications on suggested measures to be taken.
• The direct material effect of these supervisory measures is greater than RSD 1 bn.

Additional supervisory measures with a direct material effect were adopted:

• Based on the obligation to proportionally reduce the one-off fee in early loan repayment, banks return to consumers around EUR 5 mn a year.
• We prohibited one bank from charging a fee which was established to represent a negative interest rate by its nature, thereby saving consumers a total of around EUR 1.8 mn per year.
• A write-off of overdue receivables, the collection of which was otherwise allowed by the court. Hence, the total amount of written-off receivables (debt forgiveness) amounts to RSD 2.2 bn.

The card system is safe and services are easier, cheaper, faster and innovative.

We introduced a modern legal framework for payment services, which promotes innovation and matches the best European and global practice, and enables greater competition in the payment services market. In other words, in addition to banks, payment services can be offered by other non-bank payment service providers. Nine payment institutions, six e-money institutions and one postal operator are currently operating in Serbia. An efficient mechanism was also set up to protect the rights and interests of payment service users.

The NBS ensures safe and stable operation of six payment systems, which it operates, and implements activities aimed at providing security and efficiency in the use of payment instruments.

• In 2023, the NBS-operated payment systems and the DinaCard system executed a total of 386.4 mn payments, which is a 74.4% increase relative to 2012.
• We developed an instant payments system – the NBS IPS system, enabling citizens and businesses to make payments anywhere and anytime, with the money transferred to the payee’s account in one second. We are also among the few to have enabled instant payments at brick-and-mortar and online POS, using the four-party scheme payment model.
• Citizens and businesses were given a remarkably simple model for paying their monthly utility and other bills by scanning the NBS IPS QR code (without typing in any data) via their m-banking apps.
• We enabled fully secured instant payments at POS using different methods (IPS show, IPS scan), including via deep-link technology for simple instant payments in online shops using one device only (i.e. mobile phone).
• The “Transfer” service was implemented, providing citizens with the opportunity to simply, via mobile banking applications, make instant payments by entering only the mobile phone number of the registered payee or selecting it from the directory, without the need to remember templates, write down or enter the payee’s account number.
• With a view to implementing the projects of public administration digitalisation, we supported the E-Pay project, whereby Serbian citizens were enabled to pay for the services provided by the Ministry of the Interior in relation to the issuance of personal documents electronically, by simply scanning the NBS IPS QR code on the uniform payment slip generated on the E-Pay portal.
• We have established cooperation with the Rakuten Viber company, aimed at enabling instant payments through the Viber application, by connecting the application and the services of the NBS IPS system, to the benefit of citizens in terms of simple and prompt money transfer.
• We also enabled distance contract conclusion using customer video identification in 2018, increasing the number of contracts each year. The number of distance contracts concluded in 2023 rose four times from 2019, to 176,090.
• We upgraded the national card system – DinaCard, by introducing new technology (as of 1 June 2024, all new cards are chip-based) and card functionalities – instalment payments with a debit card as a substitute for cheques and cash withdrawal alongside purchase.
• The number of merchants enabling DinaCard payments in their internet POS is increasing by the day (currently around 2,500 merchants), and the number of users who use the national card for internet payments is higher each month. We have established successful cooperation with international card systems UnionPay and Discover, thus continuing to promote the cross-border use of the national payment card.
• The introduction of numerous new services as competition to expensive foreign brands has helped boost the DinaCard turnover and halve the average merchant fee from 2.10% to 1.05%. Thanks to this alone, within the span of five years (2019–2023), savings of EUR 300 mn were made in the trade system, this being at the same time the cost that would have been passed onto buyers through the prices of goods and services.
• An initiative was launched for Serbia to join the Single Euro Payments Area (SEPA) and the European Central Bank’s TARGET Instant Payment Settlement (TIPS) to enable businesses and citizens to make international payments in euros with all SEPA countries and territories in an efficient way – securely, simply, promptly and at lower costs.
• With the aim of developing cross-border payments between countries in the region, direct payment operations between the Republic of Serbia and Montenegro were established in December 2023. Currently, the NBS Interbank and International Clearing System of Foreign Exchange Payments include 13 banks headquartered in Serbia, the NBS, seven banks from Bosnia and Herzegovina and one bank from Montenegro.

A predictable business environment is conducive to boosting investment, foreign trade and economic activity.

• A predictable business environment created favourable conditions for boosting investment, foreign trade and economic activity.
• Relative to 2012, goods and services exports increased almost four times – from EUR 11.5 bn in 2012 to EUR 41.0 bn in 2023.
• As of 2016 more than a half of Serbia’s production goes to foreign markets – the share of goods and services exports in GDP rose from 35.8% in 2012 to almost 60% in 2023.
• The environment of macroeconomic stability and favourable prospects is also conducive to FDIs, whose inflow amounted to EUR 34 bn during the last 12 years, with their EUR 4.5 bn record inflow in 2023.
• In the previous ten years, the FDI inflow was mainly channelled to export-oriented sectors, which resulted in the widening of Serbia’s export base and relative resilience of our exports to weaker external demand during the pandemic, but also pronounced geopolitical tensions. A high net FDI inflow worked towards improving Serbia’s external position, as it has continuously covered the current account deficit since 2015. In 2023, this coverage measured 233%.

The NBS contributes significantly to Serbia’s credibility in the international community.

When upgrading Serbia’s credit rating to a notch from investment grade, rating agencies cited the results of the NBS as one of the important factors in this respect. Thus, Standard and Poor’s, which raised Serbia’s credit rating to half a step away from investment grade, has affirmed for years now that the NBS has earned credibility and proven its operational independence through the continuity of its results. They also noted that the exchange rate regime facilitates the economy’s successful adjustment to international developments. In addition, the NBS interventions in the FX market contribute to the preservation of price and financial stability and the increase in the country’s FX reserves to a record level, including a significant lengthening of the maturity of dinar government securities.

The past twelve years have been characterised by successful cooperation with the International Monetary Fund as well. In this period, Governor Jorgovanka Tabaković, who is also the Governor of the Republic of Serbia to the International Monetary Fund, oriented this cooperation towards building a partnership, which is the main characteristic of the relationship between our country and this international institution today. Since 2015 the agreed economic programmes are constantly exceeding the initially agreed parameters both in terms of speed and scale. In its reports, the International Monetary Fund assesses that in the past decade, despite external shocks, Serbia achieved impressive economic results, reflecting its solid economic policy. People in key positions in the International Monetary Fund made the following estimates in April 2024:

• Serbia is a bright spot in Europe!
• Serbia implements excellent policies!
• Trust is earned by working and producing results, creating new jobs and а better standard. Credibility comes with deeds.
• People leading Serbia are doing an excellent job, evidenced by the high growth and many record-high indicators – record high FX reserves, the highest employment, excellent exports!

A joint assessment of all investors is that Serbia’s macroeconomics fundamentals are excellent and that Serbia deserved an investment grade a long time ago. Serbia is a country which has achieved a lot in the previous years, proving that it knows how to maintain stability and stay on the upward path in all conditions, owing to its credible policies. The most significant international investors today estimate that:

• Serbia is one of the three key markets that we are currently monitoring.
• Serbia is already considered an investment-grade country!
• Investment grade is only a matter of time, it has been deserved a long time ago.

Under the European integrations process we participate in eight negotiation groups, leading the process in the most important economic areas – Financial services and Economic and monetary policy, where we are the first lead institution. We are a second lead institution in the area of Free movement of capital. All three chapters are open.

We signed a bilateral currency swap arrangement with the People’s Bank of China in 2016, which enabled the exchange of national currencies of Serbia and China via individual swap transactions between the two central banks. At end-2023 we signed the Memorandum of Understanding with the People’s Bank of China on the establishment of a clearing arrangement and assigning of a clearing bank in Serbia for the Chinese yuan, which is yet another confirmation of the full support to the country’s strategy to diversify markets with which we cooperate.

Modern reform laws and regulatory solutions benefit citizens and corporates.

The NBS has also been recognised as an institution which contributes to the improvement of the business environment, easier and cheaper financial services and greater protection of financial service consumers in all segments through legislative initiatives and many proposals of laws, as well as through the adoption of many bylaws and participation in other regulatory reforms.

Numerous regulatory activities enabled:

• Establishment of the modern legal framework which provides adequate instruments to the NBS for implementing monetary and foreign exchange policy and guarantees its independence (amendments to the Law on the National Bank of Serbia from 2012, 2015 and 2018).
• Change of the bank resolution framework, which ensures the continuity of critical functions of the bank along with full protection of depositors and the lowest cost for the country, which proved viable in practice in the case of Sberbank (amendments to the Law on Banks from 2015).
• Creation of the ecosystem for innovative solutions in the digital assets market and its adequate development (the Law on Digital Assets and all accompanying bylaws), with the appearance of the first entities licenced by the NBS to operate with virtual currencies in the domestic market in accordance with international standards.
• Modernisation of payment service provision in the country and abroad and greater competition in the payment services market (the Law on Payment Services and its amendments in 2018 and 2024).
• Harmonisation and lowering of costs including their greater transparency in cases of citizens’ and corporates‘ payments (the Law оn Multilateral Interchange Fees and Special Operating Rules for Card-Based Payment Transactions, Decision on the Payment Account with Basic Features).
• Greater protection and improvement of the position of financial service consumers (amendments to the Law on the Protection of Financial Service Consumers), particularly in conditions of the increasing use of ICT (the Law on the Protection of Financial Service Consumers in Distance Contracts).
• Introduction of financial collateral under international standards in the domestic financial market, which improves legal security and efficiency of liabilities settlement in the financial market, reduces credit and systemic risk (the Law on Financial Collateral) and aids the development of the financial market.
• Improvement of the legal framework governing the capital market, active participation in the preparation of the new Law on the Capital Market, and strategies for the development of the capital market.
• Improvement and wider use of cashless payments in the context of programmes and the strategy for curbing of the grey economy, in cooperation with the Government and competent ministries.

Enormous progress has been achieved in the fight against money laundering and terrorism financing.

Significant legislative activities of the NBS, implemented with other competent bodies in the area of the fight against money laundering and terrorism financing, enabled the improvement of the legal framework governing this area, acknowledging the use of modern technological devices in the financial sector – e.g. regulation of the procedure for client video-identification among the first in Europe, a service which has been widely used.

A significant role of the NBS in this area has been evidenced by full compliance with the international standards, recognised by the relevant international institutions (FATF and MONEYVAL) not only for regulations governing the operation of financial institutions supervised by the NBS, but also for the efficiency of their implementation. Owing to this, with a higher rating awarded in the December MONEYVAL meeting in 2023 for FATF Recommendation No 15 (new technologies and virtual assets), the Republic of Serbia has achieved compliance with all 40 FATF recommendations. We thus entered a group of ten jurisdictions in the world with this degree of compliance.

Artificial intelligence and machine learning methods have become integral to many central banking areas.

• We are continuously developing our models for macroeconomic projections using both artificial intelligence and machine learning methods.
• A specific application of the collection and processing of mass data is of particular importance to us in inflation nowcasting, which we use to collect a great number of prices of products and services from the internet (around 30,000) from over 130 websites. In this way we obtain inflation nowcast, which is important for the generation of both short- and medium-term inflation projections. The results have been excellent so far, since our data on actual inflation almost entirely match the data published by the Statistical Office.

We are reinforcing the NBS by strengthening its key resource – manpower, as people make institutions.

In the past twelve years numerous activities aimed at organisational strengthening have been carried out, the staff qualification structure has improved, and human resources have been renewed by hiring young, most talented people.

• On 1 January 2019, the NBS took over 62 employees from the Tax Administration of the Ministry of Finance who are in charge of exchange and foreign currency operations.
• The number of employees with graduate degrees increased by 39% and those with postgraduate degrees by 11%.

• We signed 16 memoranda on business cooperation with higher education institutions in the Republic of Serbia, and six memoranda with faculties from the Republic of Srpska. This enabled close to 800 university students to undergo internship and become familiar with the key operational processes of a central bank, while the best students stayed to work at the NBS.
• Despite the increasing demand for talents in the knowledge-based market, we managed to attract the best and be their first choice. The NBS has become an attractive employer for young people who wish to improve their theoretical knowledge acquired at university – the number of employees aged between 20 and 30 rose by 36.06%.

“Our goals are defined by law – price and financial stability, with support to the economic policy. We have been contributing to stability for twelve years and stability brings benefits to all – citizens and corporates, exporters and importers, investors and consumers. And I will reiterate what I often emphasise: in Serbia, stability has become the new reality. In Serbia, nobody has to look at the exchange list with trepidation anymore. And yet, stability is not a given. It does not go without saying, but is a result of well-calibrated measures, caution and even audacity in the current conditions imposed by the global political scene. Often, among economists, economics and politics are separated, but that is unfounded. I stand behind my claim that only together they make a unity and that these results would not have been possible without political stability. We have proved that for us there is no alternative to stability, aware of the fact that there are no final victories in our line of work. Confidence evidenced by the record high dinar savings will be justified in the coming period too with our results in favour of citizens. Words are the beginning, but only deeds and results speak about all of us”, concluded Governor Tabaković.