Maintained Stability and Payment System Innovations – Key Features of NBS Work in 2018
In 2018 as well the NBS maintained inflation at a low and stable level, increased the country’s FX reserves and strengthened stability of the financial system. The dinar stayed broadly stable against the euro, dinar savings reached record highs, lending activity stepped up, and NPLs fell to historical lows.
The NBS managed to curb inflation to low and stable levels, comparable to those in advanced economies, and to keep it there for the past five years. In the face of rather challenging international circumstances, pursuing a policy of neither a ”strong” nor ”weak” dinar, the NBS ensured and maintained relative stability of the exchange rate owing to its rational use of FX reserves and timely, objective and unbiased responses that went in both directions. FX reserves exceeded EUR 11 bn even though the government repaid its debt by more than a billion dollars on account of maturing euro bonds. At end-November, net FX reserves were at their highest level since 2000.
The terms of financing for the private sector and the government improved further, while lending activity is on the rise, reflecting, among other things, continued monetary policy easing. In 2018 the key policy rate was lowered on two occasions, in March and April, to 3%, its lowest level in the inflation targeting regime. The volume of lending went up against the background of further NPL resolution efforts. The share of NPLs in total loans equals 6.3%, which is its lowest level since 2008 when the monitoring of this asset quality indicator began. The Serbian banking system remained sound and highly liquid throughout the year.
These results contributed not only to sustainable economic growth and a better standard of living, but also helped the NBS to focus on innovations and modernisation, in accordance with new ideas and evolving needs of operation in the contemporary world. The NBS introduced a cutting-edge instant payments system, enabling citizens and business to make and receive payments 24/7, 365 days a year. Payments can be made from modern communication devices, anytime, from any location, with the payee’s account credited within a few seconds only. The QR code standardisation has created the precondition for more efficient payments in online and brick-and-mortar points of sale. The NBS initiated the adoption of the Law on Multilateral Interchange Fees, which lowered the costs of card-based payment transactions. The Law Amending the Law on Payment Services introduced greater transparency and comparability of fees for payment services. Changes to secondary legislation abolished the mandatory use of stamps in account opening and use of payment orders.
By pursuing its regulatory activities and setting up state-of-the-art infrastructure, the NBS encourages the use of modern payment instruments, i.e. cashless payments, which produce numerous positive macroeconomic effects. As the operator of the national card scheme DinaCard, the NBS continued to upgrade the DinaCard payment card’s performance, allowing for its online and cross-border use through cooperation with global networks UnionPay and Discover.
In addition, the NBS undertook measures to ban unfair practice of some exchange dealers applying in conversion the exchange rates that significantly deviated from the NBS official middle exchange rate.
The NBS also plays a lead role in the Negotiating Chapter 17: Economic and monetary policy, opened this year in Brussels. Owing to modern legislation aligned with EU standards on economic and monetary policy, Serbia will continue to maintain macroeconomic stability, enhance competitiveness and support economic growth.
The IMF Executive Board approved to the Republic of Serbia a new programme of cooperation supported by the Policy Coordination Instrument. The programme builds on the precautionary Stand-By Arrangement successfully completed in February 2018 and is yet another confirmation of the successful implementation of economic reforms and the progress achieved.
The NBS’s work is recognised and positively assessed by other international institutions too. Thus, in its latest press release on upgrading Serbia’s outlook from stable to positive, Standard & Poor’s underscores that the NBS has proved operational independence with its effective steps and actions under the inflation targeting regime, has earned credibility and anchored inflation expectations.
Owing to consistent implementation of monetary policy and its full coordination with fiscal policy, together with the Government we have achieved the results that reinforce market players’ confidence in economic policy makers and pave the way for sustainable growth in the years to come. Going forward our priority remains the same – to serve citizens and businesses by maintaining stability and taking actions that improve everyday life.