Transcript Document

Macroeconomic Developments
January– September 2005
Radovan Jelasic, Governor
Belgrade, November 3, 2005
1
Contents
• Prices (inflation, interest rates, wages, productivity)
• The dinar exchange rate
• External position (current account, capital inflow, foreign exchange reserves,
indebtedness)
• Economic growth
• Fiscal policy
• Моnetary policy and developments
• Оther
Measures to be undertaken by the NBS...
•
Raising the reserve requirement ratio on enterprises’ foreign exchange deposits and
external borrowing from 29% to 35% as of November 10, 2005;
•
Lowering the reserve requirement ratio on dinar deposits from 20% to 18% as of
November 10, 2005;
•
Lowering the reserve requirement ratio on citizens’ foreign exchange savings from 41% to
40% as of December 10, 2005;
•
Introduction of obligatory 20% deposit and a monthly installment of 30% of overall
household income on all loans, apart from housing loans, for the period of 10 years
instead of the present 5 years – otherwise, a higher provisioning level will be needed;
•
As of February 1, 2006, physical persons will be required to obtain a report of the Credit
Bureau when taking a loan or lease - otherwise, a higher provisioning level will be
needed;
•
The requirement for leasing companies to report to the Credit Bureau on all transactions
with physical entities;
•
The requirement to disclose the unique leasing fee as of February 1, 2006
•
Strengthening the role of repo operations.
... and expected effects
•
Curbed inflationary pressures as a consequence of reduced domestic demand;
•
Decelerated external borrowing;
•
Lower euroization level;
•
Further strengthening of dinar and foreign exchange savings;
•
Strengthening of NBS foreign exchange reserves, which will positively affect the dinar
exchange rate!
During 2005 inflation will shoot past the projected level; it
has been on the rise since 2003
Monthly inflation trends in 2004 and 2005
у%
3.0
у%
2.7
2.5
1.7
1.5
1.4
1.5
1.0
0.9
1.0
0.8
0.8
1.7
1.4
0.4
17.0
1.1
0.4
0.4
Маrch
Аpril
Маy
Јune
12.0
10.0
7.8
6.0
0.5
14.0
13.0
February
13.7
8.0
0.0
Јаnuary
16-17
14.8
15.0
0.8
0.6
0.5
16.0
16.0
1.1
0.8
18.0
Inflation in period 2002-2005
14.0
2.0
2.0
19.0
у%
18.0
Јuly
Аugust September Оctober
4.0
2.0
0.0
2002
2004
2005
2003
2004
2005
Interannual growth rates
Source: RSO
Source: RSO
• Inflation is not just “one of the indicators” of the efficiency of economic policy, but one of
the most significant indicators;
• From the viewpoint of the NBS, high economic growth does not justify the high inflation
level!
• Out of 13.7% price growth in the first ten months, 6.2% was driven by:
– Petroleum products2.5%
- Utilities 2.2%
– Еlectricity 0.5%
- Effect of VAT introduction 2.0%
Rise in core inflation primarily points at aggregate demand growth
Core inflation and money supply M1 trends
interannual rates, %
30
25
20
15
10
5
0
1
3
5
Source: RSO and NBS
7
2004
9
11
М1
1
3
5
7
2005
9
Core inflation
• In the first 10 months of 2005, core inflation accounted for almost 50% of overall inflation;
• In the second half of the year, money supply rose substantially mainly in respect of the
conversion of foreign exchange into dinars due to foreign capital inflow, which negatively
affected the inflation rate.
With a view to increasing sterilization and due to higher inflation rate,
the NBS offers a higher interest rate
NBS reference weighted interest rates and NBS securities placement in 2005
2005
% at the annual level
CSD mill.
20.0
25000
18.0
20000
16.0
15000
14.0
10000
12.0
5000
10.0
0
February
Маrch
Аpril
14 days
Source: NBS
Маy
30 days
Јune
Јuly
Аugust September Оctober
60 days
NBS securities
• The 14-day repo rate will be
used as a reference rate by
the NBS;
• Sterilization will be stronger
albeit it implies higher costs
for the NBS and possibly a
higher level of interest rates in
the short run!
Average wages in Serbia have reached CSD 18,345 (EUR
217), and the rise of real wages stands at 5.9% showing
an upward trend
Average real net wages
у%
20
18
16
14
12
Interannual growth
Тrend
10
8
6
4
2
0
12
2002
2
4
Source: RSO
6
2003
8
10
12
2
4
6
2004
8
10
12
2
4
6
2005
8
Wages in the public sector declined by 0.5% in real terms,
reaching CSD 20,677 (EUR 245) with a stable tendency
Average real net wages in the public sector
%
40
35
30
25
20
Interannual growth
Тrend
15
10
5
0
-5
-10
12
2002
3
Source: RSO
6
2003
9
12
3
6
2004
9
12
3
6
2005
9
Labor costs and productivity grow, but employment is on the
decline
Productivity and real wages trends in industry
(2004=100)
• Real gross wages growth in
the industry (10.4% in the first
nine months) is higher than
productivity growth (5.6%), i.e.
unit labor costs in the industry
went up by 4.5%;
120.0
110.0
100.0
90.0
80.0
• However, at the level of the
overall economy, unit labor
costs have been reduced.
70.0
60.0
1
Source: RSO
3
5
7
2003
9
11
Productivity
1
3
5
7
2004
9
11
1
3
Real gross wages
5
7
2005
9
The NBS pursues an exchange rate policy that balances
influences both on inflation and balance of payments
Trends of retail prices and the dinar exchange rate** by quarters 2005
%
16.0
13.7
12.0
8.0
5.1
0.3
0.0
-4.0
3.6
2.8
4.0
-2.7
-2.1 -2.2
-2.3
-0.2
-1.5
-8.0
-7.8
-12.0
I
Retail prices
II
III
January-October
Euro nominal exchange rate Real effective exchange rate**
* Negative rate implies depreciation of the dinar, and positive rate implies appreciation of the dinar.
Source: NBS and RSO
** Real effective exchange rate calculated against the currency basket.
A considerable depreciation
or appreciation would exert
a negative impact on either
inflation or balance of
payments.
The role of the market in determining the exchange rate is
gradually becoming stronger
Trends of the euro nominal exchange rate against the dinar
у%
in CSD
86.0
0.6
85.5
0.4
85.0
0.2
84.5
0
84.0
83.5
-0.2
83.0
-0.4
82.5
-0.6
• Banks should develop
more efficient risk
management;
82.0
July
August
Daily changes*
September
Оctober
Level of exchange rate
* Negative rate implies depreciation of the dinar, and positive rate implies appreciation of the dinar.
Source: NBS
• Significant daily
fluctuations reflect
market relations;
• Banks should (if they
wish to advise their
clients in a
professional manner)
inform their clients of
the existing risks.
The NBS encourages the interbank foreign exchange market
(IFEM) development, and its interventions are becoming
increasingly less important
Sale of foreign exchange by the NBS at the IFEM session and interbank trade
outside the IFEM session
in EUR mill.
in EUR mill.
700
2,000
1,763
1,604
1,750
1,607
577.7
600
1,545
1,373
1,500
1,250
1,015
400
462.6
452.7
500
386.8
358.0
370.4
1,000
789
300
750
200
500
192
100
250
0
0
2002*
2003
Banks-NBS (IFEM)
Source: NBS
2004
Јаn-Oct. 2005
I
Bank-bank
* Total since the introduction of the fixing session on May 14 until Dec 12, 2002
Source: NBS.
II
2005
Banks-NBS (IFEM)
III
Bank-bank
Current account in 2005 is much more favorable mainly
owing to export boost
Export and import trends by quarters
in EUR mill.
7,000.0
+4.9%
6,000.0
Coverage of import by export of
goods and services in 2004 stood
at 44.6%, whereas in the first nine
months of 2005 it reached 54.6%.
5,000.0
+26.5%
4,000.0
3,000.0
+15.1%
+6.2%
-8.2%
2,000.0
+15.2%
+38.0%
+29.3%
1,000.0
0.0
Export
I quarter
Source: NBS
Import
Export
Import
II quarter
2004
Export
Import
III quarter
Export
Import
Total (I-III)
2005
Current trend of export growth is sustainable in the long
run
•
Export determinants
– preferential status on EU markets;
– better quality of export supply, especially supply of privatized companies;
– effect of VAT introduction;
– the key factors behind export growth are the following: ferrous metallurgy, nonferrous metals, sugar, grain, clothes and footwear (almost 2/3 increment in the nine
months of 2005).
Import determinants
– effect of VAT introduction;
– growth of crude oil prices in the world market;
– the key factors behind import growth are the following: energy, ferrous and nonferrous metallurgy (increment higher by around 25%).
Current payments deficit and capital inflow
in EUR mill.
3000.0
505
1619
Indebtedness
-1371
Current account
balance
1747
901
935
-1350
-1362
Foreign direct
investments
925
1203
1000.0
1118
780
2000.0
1116
0.0
-886
-1000.0
-2234
-2000.0
FX reserves
-3000.0
2002
2003
2004
Jan-Sept. 2005
Projections 2005
Source: NBS
•
Structure of capital inflow has improved – foreign direct investments have for the first time
sufficed for financing the deficit in the first nine months of 2005;
•
Determinants of capital inflow: lower risk, high interest spread and high demand for capital;
•
The structure of the 2005 current account so far is sustainable in the long term!
Although external debt balance has been on the rise during
2005, the share of public debt is decreasing
Level and structure of external debt of the Republic of Serbia*
in EUR mill.
%
14.0
62.0
11.3
12.0
8.8
9.0
10.0
8.0
60.0
9.8
37,1%
25,8%
27,2
58.0
Private debt
32.2%
56.0
6.0
4.0
65.4%
2.0
8.8%
64.0
%
8.7%
59.4%
55.0%
54.0
52.0
8.4%
7.9%
0.0
50.0
2002
2003
Public debt
2004
Kosovo and
Metohija
Jan-Aug. 2005
Share in GDP (right scale)
*In all observed years, the debt towards the London Club has stood at USD 1.08 billion, while the debt towards the Paris Club
has been reduced by USD 730 million. The share of debt of Kosovo and Metohija for the previous period has been calculated on the basis of the debt structure in 2005
Source: NBS
The expected GDP growth in 2005 will be around 5%
Real GDP growth by quarters in 2004 and 2005
%
Sectors “responsible” for growth:
10.0
8.0
6.0
7.1
6.8
5.3
4.8
5.8
6.1
4.0
• Financial services – 5.9% of
GDP
2.0
0.0
So urce: RSO
• Trade – 7.7% of GDP
I
2004
II
Total (I-II)
2005
• Transport – 7.7% of GDP
Role of fiscal policy remains crucial from the viewpoint of
inflation
CSD billion
Consolidated public revenues and expenditures
850
Consolidated public revenues and expenditures
% GDP
46
800
45
750
44
700
43
650
600
42
550
41
500
40
450
39
400
2003
2004
Source: Ministry of Finance
2005
Revenues
2006
Expenditures
38
2003
2004
Source: Ministry of Finance
2005
Revenues
2006
Expenditures
•
In 2005, consolidated government revenues rose by around 19.5% compared to
2004 (the planned increase in 2006 is 15.4%);
•
In 2005, consolidated government expenditures rose by almost 16.1%
compared to 2004 (planned increase in 2006 is 13.7%);
•
A surplus has been recorded, but both revenues and expenditures witnessed a
high rise – the reduction of expenditures is still the main challenge facing the
fiscal policy.
Monetary policy challenges and key instruments
Challenges
•
Lowering of the inflation rate;
•
Reduction of the euroization level;
•
Growth of dinar savings;
•
A more moderate rise in lending to
households.
Instruments
•
Strengthening the influence of
interest rates;
•
Open market operations;
•
Banking sector liquidity;
•
Required reserves;
•
Deposit and credit facilities.
The largest change sustained by lending activity was that
of its structure, with the share of household lending
registering a steep rise
CSD billion
90.0
81.2
80.0
66.4
70.0
legal entities
53.2%
60.0
50.0
23.6
30.0
20.0
59.8%
37.3
40.0
29.6
23.7
46.1%
20.3
13.1
71.9%
10.0
28.1%
0.0
37.4%
47.3%
62.6%
77.8%
22.2%
2004
2005
I quarter
60.2%
52.7%
2004
2005
II quarter
46.8%
40.1%
39.8%
households
53.9%
2004
2005
III quarter
2004
2005
Total (I-III)
Source: NBS
Average monthly growth of household lending in 2005 amounted to CSD 4.6 billion, whereas in
2004 it stood at mere CSD 2.6 billion!