NACRT ZAKLJUAKA SAVETA EVROPE COUNCIL OF THE EUROPEAN UNION DRAFT COCLUSIONS

Guvernerov govor na Ministarskom dialogu, Brisel, jul 2013.(tekst crvene boje nije bio deo govora zbog ogranienog vremena)Governors speech at the Ministerial Dialogue , Brussels, July 2013(text in red has not been part of the speech due to short timing)

Dame i gospodo, uvaene kolege,Veliko mi je zadovoljstvo i ast da Vam se obratim ovom prilikom.Biu konkretna.Ladies and gentlemen, esteemed colleagues,It is a great pleasure and honor for me to address you on this occasion. Let me be concrete.

Kao to je u dokumentu ECB-a ve uoeno, pootravanje monetarne politike s kraja prole godine i poetkom ove godine vreno je prevashodno u cilju spreavanja prenosnih efekata rasta cena hrane na inflaciona oekivanja (The NBS gradually tightened its monetary policy stance in order to prevent spillovers to inflation expectations). Namera nam je, dakle, bila, da se smanje inflaciona oekivanja, a ne kreditna aktivnost iji se rast ve usporio. Ako imate u vidu da su od poetka ove godine inflaciona oekivanja finansijskog sektora bila u padu, i da su padala ak i kada je meugodinja inflacija beleila rast, moe se rei da smo bili uspeni u naoj nameri. Ostaje nesporna injenica da su inflaciona oekivanja, iako u padu, i dalje iznad gornje granice cilja. Zbog toga emo nastaviti da sprovodimo transparentnu komunikaciju sa javnou za koju verujemo da je veoma vaan element reima targetiranja inflacije, ali i nastojati da implementiramo strukturne mere koje e reiti problem volatilnosti inflacije koja je karakteristina za Srbiju.As mentioned in the document, the ECB has already noted, the tightening of monetary policy late last year and early this year was done primarily to prevent the transmission effects of rising food prices on inflation expectations ("NBS je postepeno pootravao mere monetarne politike u cilju spreavanja prelivanja na inflaciona oekivanja"). Our intention, therefore, was to reduce inflation expectations, and not lending, whose growth has already slowed. If you bear in mind that from the beginning of this year, the inflation expectations of the financial sector was in decline, and were falling even when the year inflation recorded growth, we can say that we were successful in our attempt. It remains an indisputable fact that inflation expectations, although declining, are still above the target limit. Therefore, we will continue to implement transparent communication with the public, which we believe is a very important element of inflation targeting regime, but also strive to implement structural measures to solve the problem of volatile inflation which is characteristic for Serbia.

Vraanje na repo operacije povlaenja likvidnosti u decembru prole godine uraeno je u periodu snanog rasta dinarske likvidnosti i pada premije rizika zemlje, kada su se intenzivirali i kratkoroniji prilivi iz inostranstva. U takvim uslovima nae banke su bile spremne da prihvate kamate koje su nie od referentne kamatne stope. Sa druge strane, na cilj je bio da kroz aukcije po viestrukoj stopi i uz ograniene obime dobijemo trina oekivanja u pogledu visine kamatnih stopa, ali i da spreimo potencijalno veliki obim carry trad-a koji bi, u periodu izraenijih priliva mogao da izazove jau aprecijaciju dinara, a u periodu nestabilnosti mogao bi da rezultira naglim odlivom kapitala i negativnim konsekvencama po nau valutu. Drugim reima, takvom politikom smo ciljali da kamatna stopa apsorbuje eventualne kratkorone okove, i time smo doprineli stabilnosti deviznog kursa u tom periodu. Nakon pojave nestabilnosti na deviznom tritu s kraja maja, kojima su bile izloene i druge zemlje u razvoju, reagovali smo poveanjem iznosa likvidnosti koji se povlai i na taj nain smo spreili jae deprecijacijske pritiske. U tom smislu mislimo da je trenutni model aukcija primeren aktuelnim trinim uslovima i da omoguava fleksibilnost centralnoj banci da promptno reaguje na trina kretanja. Ono to je sigurno jeste to da e NBS paljivo pratiti kretanja na svim segmentima finansijskog trita i svoje odluke, izmeu ostalog i o modelu aukcija, donosie shodno aktuelnim trinim uslovima, a imajui u vidu cilj za inflaciju i stabilnost finansijskog sistema. Svaka od tih odluka bie blagovremeno i transparentno komunicirana sa javnou kako bi se inflacionim oekivanjima rukovodilo na pravi nain.Restore repo liquidity withdrawal in December last year was done in the period of strong growth in dinar liquidity and falling of country risk premium, when intensified and shorter term inflows from abroad. In such circumstances, our banks were willing to accept interest rates that are lower than the reference interest rate. On the other hand, our goal has been to through auctions at multiple rates and with limited scope get market expectations of interest rates, but also to prevent the potentially large volume of carry trade which, in the period of pronounced influx, could trigger a stronger dinar appreciation, and the period of instability that could result in sudden capital outflows and negative consequences for our currency. In other words, with these policies we "targeted" that interest rates absorb any short-term shocks, thus contributing to the stability of the exchange rate at the time. After the appearance of instability in the foreign exchange market from the end of May, which other developing countries were exposed to, we reacted by increasing the amount of liquidity to be withdrawn and thus we avoided stronger depreciation pressures. In this sense, we think that the current auction model is appropriate to current market conditions and that it allows the central bank the flexibility to react promptly to market developments. What is certain is that the NBS will closely monitor developments in all segments of the financial market and its decisions, inter alia, on the model of auction, will be adopted according to the current market conditions, and bearing in mind the objective for inflation and the stability of the financial system. Each of these decisions will be communicated promptly and transparently with the public so that inflation expectations are guided in the right way.

Kada je re o volatilnosti inflacije koja je u Srbiji u velikoj meri rezultat volatilnosti cena hrane, ovaj veliki problem prepoznat je od strane NBS i na njega smo ukazali i nadlenim ministarstvima. Za poetak, oekujemo da bi nii ponderi ovih cena u novoj potroakoj korpi za 2013. kao i smanjenje carinskih stopa na cene hrane u razmeni sa EU trebali da ublae volatilnost inflacije. Kako bi se dugorono reio ovaj veliki problem, NBS e, u saradnji sa Vladom RS, raditi na merama ija bi primena doprinela stabilizaciji na tritu hrane. Kljune mere koje smo identifikovali i na kojima treba raditi u narednom periodu odnose se na:

1. Izmenu agrarne politike, posebno u delu stimulacija; 2. Uvoenje funkcije trinih intervencija; 3. Formiranje dravnog garantnog fonda koji bi preuzimao deo rizika u poljoprivrednoj proizvodnji; 4. Reformu upravljanja poljoprivrednim zemljitem koje je u vlasnitvu drave, 5. Dugorono posmatrano, veliki doprinos doao bi i od izgradnje sistema za navodnjavanje i odvodnjavanje. Pored stabilnosti na tritu hrane, oekujemo da ove mere doprinesu i poveanju konkurentnosti domae proizvodnje.Kada smo pokretali projekat strategije dinarizacije naeg sistema rekli smo da e to biti sistemski veoma vaan ali i dugoroan proces. Ako elimo trajne rezultate na ovom polju, oni moraju doi sporije, jer odriva deevroizacija visoko evroizovanog sistema podrazumeva dugotrajan proces postepenog prilagoavanja bilansa banaka i nebankarskih institucija. Jo tada smo kao prvi, tj. najvaniji stub nae strategije dinarizacije postavili uspostavljanje makroekonomskog okruenja koje karakterie niska i stabilna inflacija, stabilan finansijski sistem i odriv privredni rast na srednji rok. Ostala dva stuba podrazumevaju aktivnosti koje su usmerene na razvoj dinarskih instrumenata i dinarskog trita, kao i razvoj instrumenata zatite od deviznog rizika. Napredak na ovim drugim poljima je, kako je primeeno, ve ostvaren. Ono to je bitno jeste da ove aktivnosti vidimo kao komplementarne, a ne kao supstitute za mere koje treba sprovesti u okviru prvog i najvanijeg stuba. Naprotiv. Mere usmerene na postizanje i odravanje finansijske i makroekonomske stabilnosti su nam i dalje prioritet, ne samo u okviru projekta dinarizacije, ve su i kljune za ostvarivanje naeg osnovnog cilja a to je stabilnost cena. Potpuno smo svesni injenice da emo samo time otkloniti korene visokog nivoa evroizacije koji su nasleeni iz 90-ih godina, i da emo samo tako moi da promenimo svest naih graana koji tradicionalno tede u stranoj valuti. Zbog toga smatramo da bi pad inflacije i njeno predstojee vraanje u granice cilja, kao i stabilizacija kretanja na deviznom tritu koja je trajala osam meseci, mogli da predstavljaju bar mali stimulans za nae graane da deo svoje tednje dre u dinarima. Iako je re o skromnijim iznosima, nakon stabilizacije na deviznom tritu beleimo postepeni meseni rast dinarske tednje.Regarding the volatility of inflation in Serbia which is largely a result of the volatility of food prices, the major problem has been recognized by the NBS and we pointed to it to the line ministries. To begin with, we expect that lower weights of these prices in the new consumer basket for 2013th as well as the reduction of tariffs on food prices in trade with the EU are needed to mitigate the volatility of inflation. In order to address this major long-term problem, NBS is, in cooperation with the RS Government, to work on the application of the measures which are to contribute to the stabilization of the food market. Key measures that we identified and that need to be worked on in the future include:

1. Change in agricultural policy, especially in terms of stimulation;2. Introduction of market intervention;3. Establishment of a state guarantee fund to take over part of the risk in agricultural production;4. Reform of agricultural land owned by the state,5. In long term, a great contribution would come from the construction of irrigation and drainage systems.In addition to stability in the food market, we expect that these measures will contribute to the increase of competitiveness of domestic production.When we started the project "Dinarisation strategies of our system," we said it would be systemically important and long-term process. If we want lasting results in this field, they have to come slowly, as viable deeuroisation of high euroised system involves a long process of gradual adjustment of bank balance sheets and banking institutions. Even then we set, as the first and the most important pillar of our dinarisation strategy, the establishment of the macroeconomic environment of low and stable inflation, a stable financial system and sustainable economic growth in the medium term. The other two pillars involve activities aimed at the development of local currency instruments and the dinar market and also the development of instruments for protection of foreign exchange risk. Progress in these other fields, as has been noted, has already been achieved. What is important is that these activities are seen as complementary and not as substitutes for measures to be implemented in the first and most important pillar. On the contrary. Measures aimed at achieving and maintaining financial and macroeconomic stability remain a priority, not only within the dinarisation project, but are essential to achieving our core objective - price stability. We are fully aware of the fact that only with that well be able to remove the roots of high-level Euroization inherited from the 90s, and to change the consciousness of our citizens who traditionally save in foreign currency. We believe that the fall in inflation and its upcoming return to the goal posts, and the stabilization of the foreign exchange market, which lasted eight months, could represent at least a small incentive for our citizens to keep part of their savings in dinars. Although it is a modest amount, after stabilization of the foreign exchange market, a gradual monthly increase in dinar savings is recorded.

U 2013. i dalje oekujemo rast BDP- od oko 2,0%, koji e biti voen neto izvozom, pre svega u automobilskoj industriji, a mogu je i doprinos po osnovu izvoza naftnih derivata. Pozitivan doprinos dae i privatne i dravne investicije, dok e negativan doprinos doi od privatne i dravne potronje. U 2014. i 2015. oekujemo rast BDP-a od po 3%. Glavni rizik nae projekcije vidimo u moguem daljem usporavanju neto eksterne tranje, zbog ega su projekcije doprinosa automobilske i naftne industrije raene na bazi konzervativnih pretpostavki. Unutranji rizici mogu doi ukoliko ne usledi puna primena mera fiskalne konsolidacije, ali mi u NBS verujemo da e Vlada istrajati u nameri da ih sprovede.Eksterna neravnotea, odnosno deficit tekueg rauna u 2013. projektovan je na nivou od 8,4% BDP- to je za 2,1pp nie u odnosu na 2012. U 2014. i 2015. projekcije su jo nie i iznose 6,2% i 5,6% BDP-a. Smanjenje deficita tekueg rauna u naredne dve godine oekujemo pre svega zahvaljujui pomenutom izvozu automobilske industrije, kao i izvozu poljoprivrednih proizvoda i naftnih derivata. Istovremeno, oekujemo njegovo smanjenje i po osnovu planirane fiskalne konsolidacije i strukturnih reformi, ali i ograniene line potronje. Glavne rizike ostvarivanja projektovanog smanjenja tekueg def,icita vidimo u tempu oporavka eksterne tranje, pre svega sa EU trita. Rizik po projekciju predstavlja i kretanje svetskih cena hrane, energenata i metala. Konano, realizacija projekcije zavisie i od brzine sprovoenja programa fiskalne konsolidacije i programa strukturnih reformi koje bi poveale produktivnost srpske privrede. Mi u NBS verujemo da e Vlada istrajati u nameri da ih sprovede. Krajem juna usvojen je rebalans budeta kao i paket neophodnih mera u cilju stabilizacije dravnog budeta. Mere podrazumevaju okonanje restrukturiranja 179 preduzea iji e se broj, prema akcionom planu, smanjiti na ispod 90 do kraja godine. Vlada je donela odluku i da se povue iz upravljanja u nekim javnim preduzeima, dok bi u nekim mogla da formira meovito vlasnitvo. Vlada je istrajna u nameri da se pobolja poslovna klima, pre svega kroz izmenu Zakona o planiranju i izgradnji kao i Zakona o radu. Takoe, promenama Zakona o budetskom sistemu uvedena su nova pravila za indeksaciju plata i penzija, a predvieno je i uvoenje registra zaposlenih u javnom sektoru. Rok za evidentiranje u bazi podataka svih koji rade u tom sektoru limitiran je na 30. septembar. Od januara 2014. poee da se sprovodi i centralizovani obraun zarada, to e omoguiti da se eliminiu neki nepotrebni trokovi koji trenutno nisu tako vidljivi.Kada je re o finansiranju tekueg deficita, oekuje se da u 2013. i 2014. SDI (Strane direktne investicije) ponovo preuzmu kljunu ulogu. Za 2013. najavljena je realizacija nekoliko velikih meudravnih projekata, pre svega u poljoprivredi (zajedniko ulaganje UAE i Vlade RS) i energetskom sektoru (Juni tok i hidro i termo elektrane). Dodatni prihodi po osnovu SDI mogui su ukoliko drava proda svoj udeo u nekom od preostalih velikih dravnih preduzea, ali te prihode nismo ukljuili u projekciju.In 2013th we still expect GDP growth of around 2.0%, which will be driven by net exports, primarily in the automotive industry, and there is possible contribution from export of petroleum products. A positive contribution will give both private and public investments, while negative contributions come from private and government consumption. In 2014th and 2015th we expect annual GDP growth of 3%. The main risk to our projections we see in possible further slowdown in net external demand, for which the projections of contributions of automotive and oil industries are made on the basis of conservative assumptions. Internal risks can occur if above mentioned is not followed by the full implementation of fiscal consolidation, but we at NBS believe that the government will persevere in order to implement them.External imbalances, respectively current account deficits in the 2013th is projected at 8.4% of GDP, which is by 2.1 percentage points lower compared to the 2012th. In 2014th and 2015th projections are even lower, amounting to 6.2% and 5.6% of GDP. We expect current account deficit in the next two years primarily due to the aforementioned automotive exports and the exports of agricultural products and petroleum products. At the same time, we expect it to drop due to the planned fiscal consolidation, structural reforms, and limited personal spending. The main risks of achieving the projected reduction in the current account deficit is seen in the pace of recovery in external demand, particularly from the EU market. The risk to the projection are global price trends of food, energy and metals. Finally, the projection realization will depend on the speed of implementation of the program of fiscal consolidation and structural reform program that would increase the productivity of the Serbian economy. We at NBS believe that the government will continue in order to implement them. In late June government approved the revised budget and the package of measures needed to stabilize the state budget. The measures include completion of restructuring 179 companies with the number, according to the action plan, reduced to below 90 by the end of the year. The Government has decided to retire from managing in certain public enterprises, while in some it could form mixed ownership. The government is determined to improve the business climate, primarily through amendments to the Law on Planning and Construction as well as the Labor Law. Also, changes in The Law on the Budget System introduced new rules for indexation of wages and pensions, and the plan is to introduce the register of public sector employees. The deadline for registration in the database of people working in this sector is limited to September 30th. As of January 2014th centralized payroll system will begin to be implemented, which will allow to eliminate any unnecessary costs that currently are not as visible.When it comes to financing the current account deficit its expected that in the 2013th and in 2014th FDI (Foreign direct investments) regain a key role. For the 2013th the implementation of several large national projects is announced, primarily in agriculture (a joint venture of the Government of the UAE and RS) and energy (South Stream and hydro and thermal power plants). Additional income from FDI are possible if the state sold its stake in one of the remaining large state-owned enterprises, but these revenues are not included in the projection.

Da li ova Srbija danas (dananja, sadanja Srbija) treba da se osea kanjenom za sve svoje, ali i TUE greke i zablude? Nemojte da dozvolite to - to je nas zajedniki zadatak.Is this Serbia today (today's, present Serbia) supposed to feel punished for all of its and OTHERS faults and misapprehensions?Do not allow it - that is our common task.