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beneficial effects on foreign direct investment and exports,” said the
European Commission’s Autumn Forecast for Serbia.

Serbia’s current account deficit increased sharply in 2022, mainly due
to the much higher cost of energy imports. However, the European
Commission said it is expected to gradually narrow in 2023 and 2024.

2.10.3 Inflation and monetary policy

Serbia’s annual consumer price inflation accelerated during 2022,
reaching 15% in October, according to the latest data from the statistics
office.

Price growth recently has been driven by food and non-alcoholic
beverages, which went up by 22.9% y/y in October. Prices are also
growing rapidly in a range of other sectors, including hotels and
restaurants (20.7% y/y in October), housing, water, electricity, gas and
other fuels (17.9%), furnishings and household maintenance (15.7%)
and transport prices (13.2%).

In the first ten months of the year, Serbia posted inflation of 11.3%.
According to the National Bank of Serbia (NBS), prices in the
international environment are still the main generator of inflationary
pressures in Serbia, but external inflationary pressure has driven up
core inflation as well.

On November 10, the Serbian central bank raised the key policy rate by
50 bp to 4.5% due to a continued rise in cost-push pressures and
inflation, reflecting primarily import price growth.

The European Commission said recently it projected that Serbia’s
inflation will reach 11.9% in 2022, 10.6% in 2023 and 5.6% in 2024.

Central bank governor Jorgovanka Tabakovic said on November 15
that inflation could remain above average into 2024.

The latest medium-term projection from the National Bank of Serbia is
for headline inflation to remain elevated until early 2023, before starting
to fall. This decline will accelerate in the second half of 2023, but
inflation will only return to the target tolerance band in the second half
of 2024.

In a speech on November 15, Tabakovic commented that "inflation in all
countries proved to be stronger and more durable than anticipated”, a
transcript published by the NBS said.

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