Page 64 - SE Outlook Regions 2022

2.10.2 External environment

The NBS estimates that the current account deficit will range from 4%
to 5% of GDP in the medium term.

A smaller decline in exports than imports, and lower primary deficit
income in 2020 led to a lower current account deficit than anticipated,
at 4.1% of GDP (€1.9bn), against a projection of 5%. In the first 10
months of 2021, a current account deficit of €1.6bn was recorded. The
increased surplus in trade in services and surplus in secondary income
contributed to the improvement of Serbia’s current account balance.

This year the NBS expects a current deficit at the same level as last
year, ie. at 4.1% of GDP. Since 2015, Serbia's current account deficit
has been completely covered by net FDI inflows, which is expected in
the coming years, when there is a projected net FDI inflow of about 5%
of GDP.

2.10.3 Inflation and monetary policy

In Serbia, inflation has been tightly controlled by the NBS for the past
eight years, hovering at 2% a year. The absence of the expected higher
inflation at the beginning of 2021 was the result of lower growth in food
prices (primarily vegetables).

The increase in inflation from April 2021 in Serbia was driven by
temporary factors — the increase in food prices and world oil prices, as
well as the extremely low base from the same period in 2020. Some
food prices were also pushed up by the drought in Serbia last summer.
Rising prices have prompted the government to cap prices of some
basic foodstuffs.

Inflation was 7.5% in November 2021. About three quarters of
year-on-year inflation was determined by factors that monetary policy

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