July 2012
Monthly Update
Politics
The Parliament of the Republic of Serbia confirmed the new coalition Government. The Prime Minister of the new
Government is Mr. Ivica Dacic and new Minister of Finance and Economy is Mr. Mladjan Dinkic. A new Government
of the Republic of Serbia to be consisted of seventeen Ministries and nineteen Members.
The new Minister of Finance and Economy announced that budget will be analyzed over the first month of the new
Governement's term of office, in order to submit budget revision and fiscal consolidation program, that will be in line
with anti-crisis measures program, to the Parliament.
The International Steering Group for Kosovo in the meeting held in Vienna reached a conclusion that the conditions
have been fulfilled for the termination of the supervised independence of Kosovo in September.
Financial Sector „Budget deficit will be reduced by RSD 100 billion in the following year and will amount to less than 4% of GDP while
in 2014 it is expected to be below 3%”, Minister Dinkic announced. The Minister added that public finance
consolidation measures will not imply only increasing taxes but also decreasing the Government spending.
In the end of July and beginning of August, Ministry of Finance and Economy, Public Debt Administration, sold more
than RSD 23 billion of Government Securities.
Positive inflation trend continued into the year 2012, as evidenced by a record-low inflation rate, states NBS. One of the
most significant recommendations of the National Bank of Serbia for this year is the strengthening of the overall stability
of the financial system. Aiming at protection from foreign exchange risk, NBS will continue with the policy of
stimulating larger consumption of dinar through the development of dinar-denominated securities market, creating
conditions for the introduction of new dinar products and protection from exchange rate risk. In July, consumer prices
edged up by 0.1%, while year-on-year inflation settled on 6.1%.
The substantial turnover of RSD 2.32 billion was realized on 12 July on the Belgrade Stock Exchange (EUR 20.2
million), owing to the fact that 44.2% shares of the Serbian Glass Factory Paracin were sold using the single price
method.
World Bank’s Country Manager for Serbia, Loup Brefort, has assessed that Serbia is not threatened by a catastrophic
scenario owing to the fact that this is the country with numerous resources. World Bank’s Country Manager for Serbia
noted that one of the first moves of the new Government ought to be the improvement of business environment and
facilitation of doing business.
Economy Serial production of the new model "Fiat 500 L" has commenced in Kragujevac-based Fiat’s factory. New model “500
L” will be launched in more than 100 markets worldwide, including USA and region of Asia and Pacific. The car maker
Fiat Automobiles Serbia (FAS) announced that it would hire at least 800 workers in Kragujevac by the end of this year.
The ICT industry records high growth and potential in the economy of the Republic of Serbia, being export-oriented,
which is reflected in the last year’s export of software totaling EUR 200 million.
Vranje-based company "Simpo" stated today that it has tripled its export of furniture into France since the beginning of
2012, with the amount of export currently totaling EUR 5 million.
In the first six months of 2012, NIS (Petroleum Industry of Serbia) realized a net profit of RSD 22 billion, in spite of the
fluctuations in the oil prices.
Foreign Direct Investments According to the ranking carried out by the Foreign Direct Investment Magazine, being the branch of Financial Times,
the free zone of Pirot holds 41st position in the list of 50 best zones of the world presenting one of the most successful
global free zones.
The Bulgarian Consortium "Glass Industry" announced that it would invest EUR 25 million into the modernization of
Paracin-based “Serbian Glass Factory” over the next two years.
The world’s biggest food company Nestle is going to invest RSD 0.5 billion (around EUR 5 million) into the
modernization of the Surcin-based factory of culinary products.
The US Company Continental Wind Partners (CWP) is eager to invest around EUR 450 million into the development of
the first wind farm in Serbia having the capacity of 300 MW, the company has reported.
July 2012
Macroeconomic data GDP Industrial
product. - June
2012/June 2011
CPI Unemployment
rate %
Current acc. Balance YTM on 31 July,2012
Currency
units/USD
Currency
units/EUR
2011 Q2
2012 2012* July/June
Ann.
%
May - last
12 months
% of
GDP 10Y gov. bonds Jul.12 year ago Jul.12 year ago
+1.6 -0.6 +0.5 -4.0 June 0.1 6.1 25.5 Apr -3,362.3 -11.2 6.96% 95.8 71.25 117.73 102.13 * Estimated value
• According to Statistical Office data, consumer prices rose 0.1% in July. Consistent with NBS expectations, year-on-year inflation
continued up and reached 6.1% in July, chiefly due to food price hikes.
• The monthly inflation figure came out low largely as a result of a seasonal fall in fruit and vegetable prices. As in the previous two
months, the strongest boost to year-on-year inflation came from the rising prices of food products and services. According to the
National Bank of Serbia’s estimate, year-on-year inflation rate is likely to rise further in the period ahead, reflecting the increase in
import prices, the anticipated growth in administered prices and the low base effect.
• The overall external trade in the Republic of Serbia for the period January – June 2012 amounted to:
- USD 14,735.9 million - which was a 4.1% decrease compared to the same period 2011;
- EUR 11,350.5 million - which was a 3.8% increase compared to the same period 2011.
The value of exports amounted to USD 5,377.1 million, which was 7.1% decrease when compared to the same period last year, while
the value of imports amounted to USD 9,538.8 million, which was 2.3 % decrease relative to the same period last year.
Expressed in Euros, the value of exports amounted to EUR 4,144.3 million, which was the decrease of 0.6%, compared to the same
period last year. The value of imports amounted to EUR 7,206.2 million, which was a 5.7% increase when compared to the same period
last year.
The deficit amounted to USD 3,981.7 million, which was an increase of 5.2% in relation to the same period last year. The deficit
expressed in Euros amounted to 3,061.9 million, which was an increase of 13.6% compared to the same period last year.
The export - import ratio equaled 57.4% and was lower if compared to the same period last year when it was 60.5%.
Exports in June 2012 amounted to USD 999.3 million, which was a 9.2% decrease when compared to the same month last year, while
the value of imports amounted to USD 1,490.8 million, presenting 9.0% decrease relative to the same month last year.
Source: Belgrade Stock Exchange, for period on annual basis
1,6%
7,0%
4,2%
23,7%
77,5%
Real GDP growth (%)
Inflation rate (CPI)
Budget deficit (%GDP)
Unemployment rate (%)
Foreign debt (%GDP)
2011
-0,6%
6,1%
7,1%
25,5%
83,7%
Real GDP growth (%)
Inflation rate (%)
Budget deficit (% GDP)
Unemployment rate (%)
Foreign Debt %
2012 July
6
7
8
9
10
11
12
13%Belgrade OverNight Index Average
0
250
500
750
1.000
1.250
1.500Belgrade Stock Exchange Indices
Belex 15 index Belex line index
July 2012
Currency, Interest rates and FDI
Key Policy Rates of National Bank of Serbia Current value Last change Date of last change Next board meeting
Key policy rate - 2w repo 10,50
+0,25% 9.8.2011 6.9.2012 Deposit facility interest rate 8,00
Lending facility interest rate 13,00
Source: National bank of Serbia
Source: National bank of Serbia
• NBS FX reserves amounted to EUR 10,140.7 million at end-July. During the month, the largest outflow from FX reserves originated
from the withdrawal of excess FX required reserves by banks of EUR 167.4 million net, compared to the June level. Furthermore, EUR
44.5 million were due to NBS interventions in the interbank FX market (IFEM), EUR 28.7 million to the settlement of obligations to
foreign creditors, and EUR 18.9 million to the settlement of obligations under frozen FX savings. The largest inflow came from the sale
of euro-denominated government securities of EUR 30.7 million, including grants – EUR 17.1 million, and the disbursement of loans –
EUR 15.5 million.
• The industrial production in the Republic of Serbia in June 2012, when compared to June 2011, decreased by 4% and in relation to
2011 average, it decreased by 2%. In the period January- June 2012, relative to the same period 2011, industrial production decreased by
4.2%.
Foreign Direct Investments in Serbia in period 2008 – 2011
Source: National bank of Serbia
6789
101112131415
%National Bank of Serbia Interest Rates
Key policy rate - 2w repo Deposit facility interest rate
Lending facility interest rate
60
70
80
90
100
110
120
130
In RSD Exchange Rates
EUR/RSD USD/RSD
1.824
1.373
860
1.827
6%
5%
3%
6%
0%
1%
2%
3%
4%
5%
6%
7%
0
200
400
600
800
1.000
1.200
1.400
1.600
1.800
2.000
2008 2009 2010 2011
FDI (net), millions EUR FDI (net), % GDP (right axis)
July 2012
Public Debt Report
Source: Public Debt Administration
Currency structure
Dynamics of public debt
Date
Internal Public Debt External Public Debt Total Public Debt
Direct Liabilities Indirect Liabilities Direct Liabilities Indirect Liabilities
31.01.2012 92,61 -2,75 -56,97 -28,73 4,15
29.02.2012 -65,44 -2,75 -59,96 5,49 -122,66
31.03.2012 179,86 -2,53 16,53 75,63 269,49
30.04.2012 97,49 57,25 43,72 26,22 224,67
31.05.2012 3,55 -2,75 250,68 28,09 279,56
30.06.2012 127,18 8,56 -39,10 73,16 169,80
31.07.2012 38,65 -1,73 84,24 56,91 178,07
Source: Public Debt Administration
5.211 5.146 5.325 5.423 5.426 5.554 5.592
533 530 528 585 582 591 589
7.1827.122 7.138 7.182 7.433 7.393 7.478
1.545 1.551 1.626 1.652 1.681 1.754 1.811
0
1.000
2.000
3.000
4.000
5.000
6.000
7.000
8.000
9.000
10.000
11.000
12.000
13.000
14.000
15.000
31/01/12 29/02/12 31/03/12 30/04/12 31/05/12 30/06/12 31/07/12
In m
ilio
ns
of
EU
R
Stock and Structure of Public Debt
External debt - indirect
liabilities
External debt - direct
liabilities
Internal debt - indirect
liabilities
Internal debt - direct
liabilities
RSD
17%
EUR
56%
USD
18%
CHF
1%
SDR
7%
Other *
1%
Currency Amount in RSD Share of outstanding
debt %
RSD 311.749.482.499 17,12%
EUR 1.014.424.208.743 55,70%
USD 333.524.239.121 18,31%
CHF 23.071.161.793 1,27%
SDR 123.288.955.344 6,77%
Other * 15.194.622.082 0,83%
Total 1.821.252.669.583 100,00%
July 2012
INTERNAL DEBT ANALYSIS EXTERNAL DEBT ANALYSIS
Source: Public Debt Administration
Source: Public Debt Administration
Source: Public Debt Administration
39,7%
39,6%
40,0%
40,5%
39,7%
40,2%
40,0%
39,0%
39,2%
39,4%
39,6%
39,8%
40,0%
40,2%
40,4%
40,6%
Internal Public Debt/Total Public Debt ratio
60,3%60,4%
60,0%
59,5%
60,3%
59,8%
60,0%
59,0%
59,2%
59,4%
59,6%
59,8%
60,0%
60,2%
60,4%
60,6%
External Public Debt/Total Public Debt ratio
5.2115.146
5.3255.423 5.426
5.5545.592
533 530
528
585 582591 589
480
500
520
540
560
580
600
4.900
5.000
5.100
5.200
5.300
5.400
5.500
5.600
5.700
In m
ilio
ns
of
EU
R
Internal Public Debt Dynamics
Direct liabilities Indirect liabilities
7.182
7.122 7.1387.182
7.433
7.3937.478
1.545
1.551
1.6261.652
1.681
1.754
1.811
1.400
1.450
1.500
1.550
1.600
1.650
1.700
1.750
1.800
1.850
6.900
7.000
7.100
7.200
7.300
7.400
7.500
7.600
External Public Debt Dynamics
Direct Liabilities Indirect Liabilities
42,8%
56,9%
0,2%
Currency structure of internal public debt
RSD EUR USD
46%
42%
1% 11%
External Public Debt currency structure
EUR USD CHF SDR
July 2012
Government Securities
Source: Public Debt Administration
Source: Bloomberg
Source: Bloomberg
12,70%
13,25%
14,35%
14,50%
14,45%
15,74%
15,01%
10%
11%
12%
13%
14%
15%
16%
17%
3M 6M 53W 18M 24M 36M 60M
Yield curve of latest auctions
12,70%
11,18%
12,92%
13,00%13,22%
14,84%
14,75%
10%
11%
12%
13%
14%
15%
16%
3M 6M 53W 18M 24M 36M 60M
Average yield curve
0,00%1,00%2,00%3,00%4,00%5,00%6,00%7,00%8,00%9,00%
95$
97$
99$
101$
103$
105$
107$
109$ Eurobond 2021
Close Price YTM
6,20%6,40%6,60%6,80%7,00%7,20%7,40%7,60%7,80%
93$94$95$96$97$98$99$
100$101$ London Club
Close Price YTM