18/08/2023
Household savings in the local currency reached a new highest level at end-June 2023, coming at almost RSD 109 bn and continuing up in July. Operational data indicate that they have exceeded RSD 110 bn in July. This shows that by preserving financial stability and the relative stability of the EUR/RSD exchange rate, we have preserved confidence in the local currency and the banking system.
As part of its Strategy of Dinarisation of the Serbian Financial System, the NBS encourages saving in the local currency, emphasizing its higher profitability.
The analysis of the profitability of savings for the past 11 years (between June 2012 and June 2023) again showed that it pays off more to save in the local currency both in the short and long run. The crucial factors underpinning such result are the macroeconomic and financial stability over the past years (relatively stable EUR/RSD exchange rate, record-high FX reserves), higher interest rates on dinar than on euro savings, and the tax-free status of interest on dinar savings (whereas the interest on euro savings is subject to 15% tax), and monetary and fiscal policy measures that have helped preserve macroeconomic stability even in conditions of several years of global crisis (pandemic, energy crisis, global inflation growth, international geopolitical situation).
Despite global uncertainties that have persisted over the past several years, dinar savings have recorded growth with an increase in the share of long-term deposits. In the past 11 years, dinar savings have increased more than six times and at mid-2023 equalled RSD 108.7 bn. At the same time, FX savings rose 76%, from EUR 7.9 bn to EUR 13.9 bn.
During H1 2023, the relative stability of the dinar exchange rate was preserved. Appreciation pressures that prevailed from May 2022 extended into 2023 as well. This year (by end-July), the NBS bought EUR 2.4 bn net in the FX market, which is a key factor that drove FX reserves further up to EUR 23.1 bn at end-July 2023 – their highest end-of-month level on record (from 2000 onwards). This level of FX reserves is sufficient to cover more than six months’ worth of goods and services import, which is twice the minimum defined by international standards.
In the last three years, the NBS and the Serbian Government have passed a series of measures aimed at mitigating the negative consequences of the global crisis on corporates and households, which helped preserve overall financial stability. The share of NPLs in total loans has considerably declined since the start of the implementation of the NPL Resolution Strategy (2015) and equalled around 3% in May.
Serbia’s success in grappling with the global crisis is also reflected in the fact that Fitch Ratings and Standard&Poor’s have kept Serbia’s credit rating at BB+, with a stable outlook. As the key arguments underpinning their decisions, the rating agencies listed the relative stability of the exchange rate and the credibility of the monetary and overall economic policy. The IMF also confirmed Serbia’s commitment to the further implementation of structural reforms by deciding to successfully conclude the first review of the results of Serbia’s economic programme, supported by the stand-by arrangement.
The latest semi-annual analysis of the profitability of savings shows that a depositor who saved in dinars, placing a RSD 100,000 deposit for a one-year period with a rollover over 11 years, would receive, at the end of the savings term in June 2023, almost RSD 48,000 (over EUR 400) more than a depositor who deposited the equivalent amount in euros for the same period (Table 1).
One-year dinar savings, even without a rollover, would also be more profitable than saving in euros in as much as 98% of the observed one-year subperiods.
Thus, a depositor who placed a RSD 100,000 deposit in June 2022, would receive a year later almost RSD 1,900 more than a depositor who deposited the equivalent amount in euros for the same period (Table 2).
As for three-month deposits, dinar savings were more profitable than euro savings in 90% of the observed three-month subperiods, while in case of deposits termed for two years, dinar savings were more profitable in all of the 109 observed two-year subperiods. In other words, in the period of 11 years it was more profitable to save in dinars regardless of the length of the term.
Advancing dinarisation of the financial system remains a priority of the NBS and monitoring and analysing the profitability of dinar savings an important part of the process.
Monetary and FX operations department
