CURRENT MACROECONOMIC DEVELOPMENTS · Gross domestic product od Serbia and countries in the region 2006-2015 Source: Eurostat, National statistical offices of the countries in the

CURRENT MACROECONOMIC DEVELOPMENTS

April 2016

MINISTRY OF FINANCE

Republic of Serbia

Cyclical analysis of economic activity suggests that after recovery from floods economic activity is in the process of acceleration and is currently at the level of the

long-term trend

2

Gross domestic product, trend-cycle component* Assesment of turning points and phases of economic activity, the long-term trend = 100 **

* X13 ARIMA model was used for calculating the trend - cycle component

** Turning point and phases of the cycle were identified using "growth cycle“ approach, with the HP filters and Bry Boschan criteria

550

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I II III

IVI II III

IVI II III

IVI II III

IVI II III

IVI II III

IVI II III

IVI II III

IVI II III

IVI II III

IVI II III

IVI II III

IVI II III

IVI II III

IV

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

RS

D b

illi

on

Recession Peak

Trough

Peak

Trough

Peak

Trough

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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Expansion

Slowdown

Expansion

Slowdown Slowdown

ExpansionExpansion

3

In February 2016, Indicator of Economic Activity of Serbia (IEAS) recorded a high y-o-y growth, 3.8%, which represents the highest growth since November 2013. Compared to the

January, seasonally adjusted data show IEAS growth of 1.2%.

*IEAS is an indicator that provides a general picture of the current economy movements in a shorter period of time than the one given by the official statistical data, but which at the same time has a

wider scope than the ones given separately by monthly indicators. IPAS connects all the components significant for the movement of the complete economy activity within the national economy into one whole, in a monthly dynamics. It is gotten as a weighted average of the chosen separate monthly indicators, which is later linked with the official quarter data on GDP by methods of temporal disaggregation, and in that way transform into the indicator of total economy movements.

Indicator of Economic Activity by section, (contributions to the growth, pp)

IEAS in the period January 2008 to February 2016, (2015 = 100)

• The most significant contribution to the y-o-y growth ofthe economy activity in February 2016 was given by theindustrial production and sector of services. Positivecontribution is given by the other sectors as well –construction and agriculture.

• Seasonally adjusted data show that the growth of indicators hasbeen made in the last five months, which is a confirmation ofacceleration of economy activity. As a result of this, a significantgrowth trend is recorded, so the continuation of suchmovements in the next period could result in better thanexpected results in terms of GDP dynamics.

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2008 2009 2010 2011 2012 2013 2014 2015 2016

Original data Trend Seassonaly adjusted data

-2,0

-1,3 -1,3

1,5

3,0

2,22,1

2,6

1,41,2 1,2

2,2

3,8

-2

-1

0

1

2

3

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5

Feb Mar Apr Maj Jun Jul Avg Sep Okt Nov Dec Jan Feb

2016

Agriculture Industry Construction Services GDP

Indicators of current economic trends

4

Source: RSO, NBS, NEA, PF

* Positive sign marks apreciation, and negative sign depreciation.1 Data referred to March and period January-March 2016.

Indicators of current economic trends, same period of previous year=100, in %

2015 2016

2014 2015 Q1 Q2 Q3 Q4 II I-IIIndustrial production, physical scope -6.5 8.3 -1.6 11.7 13.5 9.7 14.0 11.3

Manufacturing -1.4 5.3 3.6 7.8 7.2 2.7 10.9 6.8

Turnover in retail trade, real terms 2.0 1.8 -1.0 0.9 2.2 3.4 11.8 8.9

Export of goods expressed in EUR 1.5 7.8 5.2 10.7 8.8 6.0 15.8 12.8

Import of goods expressed in EUR, c.i.f. 0.2 5.8 8.6 5.1 2.2 6.7 6.7 4.3

Consumer prices, period average 2.9 1.9 0.9 1.7 1.5 1.4 0.6 1 1.5 1

Consumer prices, y-o-y 1.7 1.5 1.9 1.9 1.4 1.5 0.6 1 0.6 1

Unemployment rate, according to ILO 19.4 17.9 19.2 17.9 16.7 17.9 - -

Unemployment level, period average -1.0 -3.2 -3.9 -3.3 -2.7 -2.7 -1.5 -1.6

Average net salaries, real terms -1.5 -2.1 -1.1 -2.2 -1.9 -0.9 2.5 1.6

Average net salaries, public sector, real terms -1.8 -7.3 -7.4 -7.7 -7.5 -4.6 -1.5 -1.1

Average pensions, real terms -2.1 -5.2 -4.7 -5.9 -5.8 -2.5 -0.4 -0.7

EUR/RSD, period average, nominal terms* -3.6 -2.8 -4.7 -4.0 -2.4 -0.4 -2.2 1 -1.1 1

EUR/RSD, period average, real terms* -1.2 -1.0 -3.6 -2.6 -1.0 0.8 -1.6 1 0.4 1

Indicators of current economic trends, in million EUR

2015 2016

2014 2015 Q1 Q2 Q3 Q4 II I-II

Foreign trade deficit, c.i.f. -4,338.1 -4,364.4 -1,099.6 -972.0 -982.1 -1,289.4 -311.1 -527,6

Current account deficit -1,984.7 -1,577.4 -510.9 -290.1 -342.9 -446.4 -108.8 -86.4

Foreign direct investments, net 1,236.3 1,803.8 345.2 440.6 510.1 512.6 128.0 227.8

NBS foreign exchange reserves, end of period 9,907 10,378 10,515 10,293 10,511 10,378 9,501 1 9,501 1

NBS interventions on foreign exchange market, net (- sold, + bought) 1,620 -520 -170 -120 -440 210 175 1 565 1

Foreign currency savings, end of period 8,525 8,629 8,642 8,670 8,590 8,629 8,636 8,636

External debt, end of period 25,676 26,354 26,602 26,414 26,225 26,354 - -

External debt, public sector, end of period 14,145 15,289 15,050 14,875 14,889 15,289 - -

External debt, private sector, end of period 11,531 11,065 11,552 11,539 11,336 11,065 - -

INTERNATIONALENVIRONMENT

Gross domestic product od Serbia and countries in the region 2006-2015

Source: Eurostat, National statistical offices of the countries in the region

* Unweighted average** SORS Estimation*** Data for 2015 for countries in the region are based on estimation (projection)

Real GDP growth rate, ten-year average (2006-2015)***, in %

Real GDP growth rate*, in %

6

4,9

5,9

5,4

-3,1

0,6

1,4

-1,0

2,6

-1,8

0,7

-4

-3

-2

-1

0

1

2

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7

%

Y-o-Y growth rates in real terms 10-year average

2,2

2,4

0,1

0,8

3,2

2,8

2,0

1,2

3,2

2,0

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

%

Countries in Region Region average *

Developments and outlook of Serbia’s largest external trade partners

7

2015 2016 2017

EstimationCurrent

projectionΔ Previous projection

Current projection

Δ Previous projection

World 3,1 3,2 -0,2 3,5 -0,1

Euro Area 1,6 1,5 -0,2 1,6 -0,1

Main RS foreign trade partners

Italy 0,8 1,0 -0,4 1,1 -0,2

Germany 1,5 1,5 -0,3 1,6 -0,2

Bosnia and Herzegovina 2,8 3,0 -0,2 3,2 -0,3

Romania 3,7 4,2 0,0 3,6 -0,1

Russian Federation -3,7 -1,8 -0,6 0,8 0,5

Montenegro 4,1 4,7 0,7 2,5 -1,6

Source: International Monetary Fund, World Economic Outlook, April 2016 update

GDP (real growth rate. %)

Source: European Commission; Eurostat

Real GDP growth rates of the main international trade partners of Serbia – quarterly indices

Source: Eurostat. SORS

BCI index and the industrial production in the euroarea

*The Business Climate Indicator (BCI) is based on an estimations ofproduction, orders and inventories, as well as the current and futureexpectations of entrepreneurs. BCI index deviates from the industrialconfidence indicator in number of inputs which are considered, and thereforeis expressed in points of standard deviation.

In March 2016, the Business Climate Indicator (BCI) for the euro area increased (by 0.02 points to 0.11)

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15Q

4seas. adj. q12008=100

EU28 Germany Italy Serbia

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2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20152016

-24

-19

-14

-9

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BCI Industrial production, y-o-y, sa, right axis

According to the OPEC data. the price of oil type Urals increased to 36.87 $/barrel in March (an increase of 6.0% compared to February). At the beginning of March, ECB lowered key interest rate by 0.05 pp to a record low of 0%, while the program of

quantitative easings expanded to € 80 billions. According to ECB’s macroeconomic projections for March, GDP growth of euro area for 2016 was revised up (from 1.7% to 1.4%). At the same time, projection of inflation was revised down from 1% to 0.1% in 2016 due

to continued oil price drop.Value of the Composite PMI index* in April (value of 53.0 ip) declined by 0.1 ip compared to March (due to receding growth in

manufacturing sector and services). Index indicates possible slowdown of economic activities at the start of the second quarter compared to the first. The Economic Sentiment Indicator (ESI) decreased in both the euro area (by 0.9 points to 103.0) and the

EU28 (by 0.7 points to 104.6), compared to February 2016.

8

• Eurozone PMI Composite index is developed by Markit LTD, and it is based on originalsurvey data collected from a representative samble of 5,000 manufacturing and servicecompanies. Methodology of this index tracks changes in employment, prices, sales andinventory. An index value above 50 indicates improving economic activity, while a valuebelow 50 indicates a deterioration.

• Economic Sentiment Indicator (ESI) was developed by the Directorate-General Financialand Economic Affairs (DG ECFIN) of the European Commission. ESI is based on theresponses on the questionnaire that is conducted in several fields: manufacturing industry,construction, retail trade, services and financial services. An index value above 100 indicatesimproving economic activity, while a value below 100 indicates a worsening.

Euro Area economic indicatorsPrices of raw materials

Source: IMF (IMF Primary Commodity Prices); Eurostat;* PMI (Purchasing Managers Index). 22 April 2016

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16

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16*

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17*

2008 2009 2010 2011 2012 2013 2014 2015

Ind

ices

Ind

ices

PFOOD - Food Price IndexPRAWM - Agricultural Raw Materials IndexPMETA - Metals Price IndexCrude Oil price index (without energy)HICP in Eurozone - right-hand scale

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2009 2010 2011 2012 2013 2014 2015 2016

Ind

ex 1

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0-2

015

=10

0

PM

I in

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>5

0 -

exp

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PMI Composite left axis ESI right axis

50 = no change

REALSECTOR

Source: SORS*Estimate: GDP - as the sum of four quarters**Estimate MoF

Contribution to the annual growth rate in pp (expenditure side)

Contribution to the annual growth rate in pp (production side)

10

The fiscal strategy of the Ministry of Finance predicted the growth of economic activity for 1.8% in the year 2016. However, high-frequency indicators from the beginning of the year point out that it

is justifiable to expect a growth bigger than predicted.

• Industrial growth and recovery of agricultural production will bethe main drivers of economic activity in 2016. Construction isalso expected to give a positive contribution to GDP growth.

• Seen by the aggregates of usage, as a result of the currentreforms, the most significant contribution to the growth isexpected from the investments. A mild positive contributionshould be given by the other aggregates as well – personalconsumption, government consumption, as well as netexport.

5,4

-3,1

0,6

1,4

-1,0

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-1,8

0,7

1,8

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-2

-1

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3

4

5

6

per

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Agriculture Industry

Construction Services

Net taxes GDP (right hand side scale)

5,4

-3,1

0,6

1,4

-1,0

2,6

-1,8

0,71,8

-15

-10

-5

0

5

10

15

per

can

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oin

tsChanges in Inventories andAcquisitions less Disposals of Valuables

Net export

Investment Government consumption

Personal consumption GDP (right hand side scale)

Source: SORS; calculated in MoF* Estimate MoF

Contribution to the quarterly growth of the GDP in pp (expenditure side)

Contribution to the quarterly growth of the GDP in pp(production side)

11

The y-o-y growth of economic activity in the first quarter of 2016 was higher than expected. Better results in the fields of industry and construction, as well as the strong growth of net

exports affected the acceleration of GDP growth (estimated 1.0% SA in Q1 2016).

• As it is estimated, the most important source of growth is theindustrial production. Positive contribution to the growth is alsogiven by the sectors of construction and agriculture, while thegrowth in the service sector is significantly above the expected (theresult of the turnover growth in the retail business, tourism andhospitality, as well as the growth of services in sectors of educationand health).

• Observed from the expenditure side, a significant acceleration ofnet export is recorded. The investment cycle which started in theprevious period has continued in the first quarter as well, which,along with intensifying the capital expenditures, results in thepositive contribution of investments. In addition, after a several-year fall, a mild recovery of final consumption is expected, whichis pointed out by the growth of trading turnover and earnings.

-5

-4

-3

-2

-1

0

1

2

3

4

5

2012 2013 2014 2015 2016

Agriculture Industry

Construction Services

Net taxes Gross domestict product (GDP)

-8

-6

-4

-2

0

2

4

6

8

2012 2013 2014 2015 2016

Private consumption Government consumption

Investment Net export

Stocks Gross Domestic Product (GDP)

The current movements indicate that the positive trends started in 2015 have continued have improved and that the recovery of the economy activity has

intensified in Q1 2016. Implemented reforms in the construction industry, labor legislation as well as the strong fiscal adjustment has favourably influenced the investemnt ambience. Characteristics of the begginig of the year are continued

reduction of internal and external imbalances and economic growth on a sound basis.

Source: SORS* Total investment contain also changes in inventories and Acquisitions less disposals of valuables.

12

GDP (expenditure side) in constant prices, deseasonalised data

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105

2008-Q42009-Q1

Q2

Q3

Q4

2010-Q1

Q2

Q3

Q4

2011-Q1

Q2

Q3

Q4

2012-Q1

Q2Q3Q4

2013-Q1

Q2

Q3

Q4

2014-Q1

Q2

Q3

Q4

2015-Q1

Q2

Q3

Q4

2016-Q1**

GDP Private consumption

Government consumption Total invesment*

2008-Q4=100

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90

110

130

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170

1902008-Q4

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Q3

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2010-Q1

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Q3Q42013-Q1

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Q2

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2015-Q1

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2016-Q1**

GDP Private consumption

Government consumption Total invesment*

Export of goods and services Import of goods and services

2008-Q4=100

Structure of gross value added

Source:SORS, calculated in MoF

Structure of gross value added in the year2014

13

Structure of gross value added in the year2015

9,3%

25,1%

5,1%

17,8%

5,2%

3,7%

10,8%

5,6%

14,4%

3,1% 8,4%

25,7%

5,7%

18,1%

5,1%

3,8%

10,9%

5,7%

13,6%

3,1%

Agriculture, forestry and fishing

Mining; manufacturing; electricity and water supply

Construction

Wholesale and retail trade; transportation and accommodation and food service activities

Information and communication

Financial and insurance activities

Real estate activities

Professional, scientific and technical activities and administrative and support service activities

Public administration and defence; compulsory social security; education and human health and social work activities

Arts, entertainment and recreation; other service activities and activities of households as employers

14

Recovery of components of domestic demand continues (household consumption and investments), which is indicated by indicators of investment activity (production of equipment, issing of building permits,

growth of newly approved loans to the economy, public infrastructure work etc). At the same time, growthin retail trade, growth of wages and employment in the private sector, strong growth of newly approved

loans to households (cash and cosumer credits) indicate the recovery of private consumption. During Q1, it was registered a real growth of government consumption, which was mostly driven by intermediate

consumption.

Source: SORS, MoF

Indicators of the Government expenditure, y-o-y growth, in %

Indicators of the consumption and income, y-o-y growth, in %

Investment activity and construction, real y-o-y growth,

in %

-25

-5

15

-45

5

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2011 2012 2013 2014 2015

Contribution of public government investment to total investment, in p.p, right-hand scaleContribution of private investment to total investment, in p.p, right-hand scaleGross fixed capital formation, ESAValue of executed works in the construction, constant pricesConstruction, ESA

-3,0

-2,5

-2,0

-1,5

-1,0

-0,5

0,0

-11

-6

-1

4

9

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2012 2013 2014 2015

Private consumption (ESA), right-hand scale

Retail trade (constant prices), left-hand scale

-12

-9

-6

-3

0

3

6

9

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2011 2012 2013 2014 2015 2016

Government expenditures on wages and salaries and goods and services, real y-o-ygrowth

Government expenditures, ESA, real y-o-y growth

Source: SORS

Indices of industrial output (2015=100) Indices of manufacturing industry (2015=100)

Industrial production in February made an y-o-y growth of 14.0%. The highest contribution to this growth was given by the manufacturing industry with the rate of 10.9%, along with recovery of food industry of 5.7% after a five-month fall. The growing trend of electrical energy production and mining has continued (22.3% and 16.4%

respectively).

15

• The growth of production is registered in 22 areas (88% of total industrial production). However, the beginning of the year is characterized by unfavorablemovements in the automotive and pharmaceutical industry.

• Observed by its purpose, a significant contribution to the total growth of industry comes from production of intermediate goods (16.5%) influenced by thegrowth of chemicals, metals and wood industry. With a high production growth of 20.1% electro-energy sector as a main contributor, which is mostlydetermined by the low base from the beginning of 2015.

• Scope of durable goods production increase by 9.2% due to strong growth of electrical equipment production, while the recovery of food industry mostlycontributed to the growth of non-durable goods of 8.4%.

• Production of capital products shows a recovery after a three-month fall. Even besides the negative trend in the car industry, an increase of 2.4% has beenmade, before all due to the activities of machine production and products made of metal.

• Seasonally adjusted data from February show a growth of total industry of 0.2%, mostly led by the growth of manufacturing of 0.6%, which is a result ofchemical industry and production of electrical equipment growth, as well as the recovery of food production and basic metals production. The growth inseasonally adjusted terms was registered for a fifth month in a row.

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2011 2012 2013 2014 2015 2016

Original data Seasonally adjusted data Trend

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Original data Seasonally adjusted data Trend

16

• Sector Electricity, gas, steam and air conditioning supply has contributed the most to the growth made in this period. The petroleum andchemicals industry, along with the growth of tobacco production, non-metallic mineral products and electrical equipment production, as wellas printing and reproduction of recorded media, have determined the growth of manufacturing sector, while the fall of motor vehiclesproduction and basic metal production, have had an opposite effect.

• The growth has been recorded in all destination groups. The most significant contribution to the growth has been given by the energyproduction with an increase of 19.9%, followed by the production of intermediary goods (11.8%) and durable goods of 9.5%. A modest growthof production of capital products and (0.8% and 3.3% respectively) are the result of negative trends in the automotive industry as well as stillfragile recovery of food industry.

In the first two months of 2016, a growth of 11.3% in industrial production has been recorded. A strong increase (23%) has been made in the sector of electrical energy production, while mining

and the manufacturing have grown by rates 12.3% and 6.8%, respectively.

Source: SORS

Contributions to the growth of industrial production, in pp (by MIGs)

Contributions to the growth of industrial production, in pp (by sections)

0,1

1,8

-2,8

6,6

0,6

4,24,1

1,4

-12,6

1,22,5

-2,2

5,5

-6,5

8,3

11,3

-13

-11

-8

-6

-3

-1

2

5

7

10

12

Electricity, gas, steam and air conditioning supplyManufacturingMining and quarryingIndustry total

0,1

1,8

-2,8

6,6

0,6

4,2 4,1

1,4

-12,6

1,22,5

-2,2

5,5

-6,5

8,3

11,3

-13

-11

-8

-6

-3

-1

2

5

7

10

12

Energy Intermediate goods, except energy

Capital goods Durable consumer goods

Non-durable consumer goods Industry total

Annual growth of the industrial production in Q4 2015 of 9.7% was achieved due to the energy sector recovery – increase in the coal exploitation and generation of electricity. Production of

chemicals, pharmaceutical and electronic equipment industry contributed to the growth of manufacturing industry of 2.7%. The growth was subdued due to the fall in the production of food

products and machinery.

Source: SORS

Contributions to growth rate of industrial production, pp(observed by sections)

Contributions to growth rate of industrial production, pp(by MIGs)

17

9,7

-15

-12

-9

-6

-3

0

3

6

9

12

15


2012 2013 2014 2015

Electricity, gas, steam and air conditioning supply

Manufacturing

Mining and quarrying

Industry total

9,7

-15

-12

-9

-6

-3

0

3

6

9

12

15


2012 2013 2014 2015

Non-durable consumer goods Durable consumer goods

Capital goods Intermediate goods, except energy

Energy Industry total

• Retail trade turnover in the first two months of 2016 increased by8.9%, in real terms;

• At the same time, Serbia was visited by around 317 thousandtourists (17.9% more than in the same period of 2015), while thenumber of overnight stays was around 1 million;

• In first two months of 2016, foreign currency inflow from tourismamounted to EUR 121 million and was 21 million higher than in thesame period of the previous year.

Source: SORS

Retail trade turnover, annual growth rate, % Construction

• In Q4 2015 a strong growth of GVA of construction sector wasregistered (8% y-o-y, at constant prices). In 2015 increase in thevalue of construction works done by 18.3% has been recorded,while the number of workers and their hours worked at theconstruction sites increased by 2.3% and 2.9%, respectively;

• In February, cement production registered a robust growth of77.3% y-o-y, as well as the production of non-metallic minerals24.5% (glass, roof tile, mortar, concrete and others);

• In January-February 2016 it was observed a increase of thenumber of issued building permits of 11.1%. Observed by the typeof buildings an increase in the buildings’ permits by 7.5% wasrecorded, and in the civil engineering increase of 22.1%(infrastructure).

Developments in the services and construction sector

18

0

100

200

300

400

500

600

700

0

20

40

60

80

100

120

140

160

180

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Feb

rua

ry

2012 2013 2014 2015 2016

00

0 t

Ind

ices

, Ø

20

15=

100

Value of construction works done

Hours worked on construction sites

Manufacture of other non-metalic mineral products

Cement Production, right-hand scale

-30

-20

-10

0

10

20

30

40

50

Ja

n

Ma

r

Ma

y

Ju

ly

Se

p

No

v

Ja

n

Ma

r

Ma

y

Ju

ly

Se

p

No

v

Ja

n

Ma

r

Ma

y

Ju

ly

Se

p

No

v

Ja

n

2013 2014 2015 2016Retail trade turnover

Catering trade

Turists' overnight stays

Wholesale and retail trade; repair of motor vehicles and motorcycles; transportation andstorage and accommodation and food service activities (national accounts)

19

LABOR MARKET

• According to the Labor Force Survey in Q4 2015 unemployment rate increased by 0.6 p.p. y-o-y, to the level of 17.9%. At the same time number ofemployed decreased by 1%, which was mostly influenced by the decrease of employment in the agriculture sector. In Q4 informal employment ratewas registered decrease y-o-y by 3.8 p.p. to 19.4%.

Source: SORS and NEA* Unemployment rate as a share of unemployed in total active population (employed and unemployed persons), employment rate as a share of employed persons in the population 15 years of age and over.** In order to improve the international comparability of data on the labor force RSO conducted their correction for 2014.

Employment and unemployment rate according to ILO* ILO unemployment rate for age category 15+

According to the LFS** the unemployment rate in 2015 decreased compared to previous year to 17.9% from 19.4%. At the same time the activity rate totaled 51.4% while employment rate

42.2%.

20

Employees aged 15 and over by industry, the contribution to growth

17,3 17,9

42,4 42,4

15

20

25

30

35

40

45

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2014 2015

Unemployment rate Employment rate 10

12

14

16

18

20

22

24

26

2008-April

2008-October

2009-April

2008-October

2010-April

2010-October

2011-April

2011-October2012-

April

2012-October

2013-April

2013-October

2014-Q1

Q2

Q3

Q4

2015-Q1

Q2

Q3

Q4

-2

-1

0

1

2

3

4

Q1 Q2 Q3 Q4

2015

Agriculture Industry Services Total

In March 2016, the average net salary increased y-o-y by 6.4%, in nominal terms, which is biggest growth since December 2013.

Source: SORS, calculated in MoF* Real growth of average salary in RSD deflated by consumer price index.

Average net salaries in RSD, nominal and real growth rate in %

21

Average net salary in EUR and real growth rates*

• In March 2016, the average net salary increased in real terms by 5.8% y-o-y. Significant increase was recorded in the mining and quarrying,electricity supply, information and communication and manufacturing;

• The decline in real wages in the public sector in February totaled 1.5%compared with the same month of the previous year;

• Real and nominal decline in salaries in the public sector influenced thereduction in the difference between the average wage of public sectorand outside of it from around 14% in February 2015 to around 7% in thesame month of 2016;

• Average net salary expressed in euro in March 2016 amounted EUR 373.

Average net salaries in RSD, nominal growth rate in %

-10

-5

0

5

10

15

20

Ja

nF

ebM

ar

Ap

rM

ay

Ju

nJ

ul

Au

gS

ep

Oct

No

vD

ecJ

an

Feb

Ma

rA

pr

Ma

yJ

un

Ju

lA

ug

Se

pO

ctN

ov

Dec

Ja

nF

ebM

ar

Ap

rM

ay

Ju

nJ

ul

Au

gS

ep

Oct

No

vD

ecJ

an

Feb

Ma

rA

pr

Ma

yJ

un

Ju

lA

ug

Se

pO

kt

No

vD

ecJ

an

Feb

Ma

r

2012 2013 2014 2015 2016

35.000

37.000

39.000

41.000

43.000

45.000

47.000

49.000

51.000

53.000

55.000

Average net wages (right-hand side scale) Nominal growth rate (left-hand side scale)

Real growth rate (left-hand side scale)

-200

-100

0

100

200

300

400

500

-10

0

10

20

30

40

50

EU

R

%

Net salary, EUR (left-hand scale)

Net salary, real growth rate (right-hand scale)

41.689

43.45243.121

45.870

2,8

4,2

-0,8

6,4

-4

-2

0

2

4

6

8

10

12

14

16

39.000

40.000

41.000

42.000

43.000

44.000

45.000

46.000

47.000

III 2013 III 2014 III 2015 III 2016

%

Average net wage, RSD Net salary, nominal growth rate (right-hand scale)

EXTERNALSECTOR

• Export of goods in February 2016amounted EUR 1,054.9 million, whileimport amounted EUR 1,366.0 million;

• Deficit was EUR 311.1 million, EUR 58.2million less (down by 15.8%) than in thesame m0nth of previous year.

• According to economic destination, exportgrowth in February was largelydetermined by growth in export ofconsumer goods;

• Biggest contributors to exports growth inFebruary 2016 were power-generatingmachinery and equipment, electricalmachinery and apparatus and vegetablesand fruit2 (2.5 pp, 2.4 pp and 1.5 pp,respectively);

• Growth of imports was determined byincreased imports of petroleum andpetroleum products, electrical machineryand apparatus and power-generatingmachinery (contribution: 1.1 pp, 0.8 ppand 0.5 pp, respectively).

• In February 2016 77.2% of the exports wascovered by imports (6.1 pp more than inthe same month of 2015).

Source: SORS

External trade, million EUR

Export, million EUR

Foreign trade in February was significantly improved. The y-o-y growth in exports of 15,8% was largely determined by the growth of exports of electrical equipment, chemicals

and chemical products and rubber and plastic products1 (growth of 50.4%, 49.1% and 22.5% y-o-y, respectively). Imports increased by 6.7% y-o-y.

231 According to economic destination of the EU2 According to SITC sections

-311,1

1.054,9

1.366,0

-800

-400

0

400

800

1.200

1.600

Ja

n

Ma

r

Ma

y

Ju

ly

Se

p

No

v

Ja

n

Ma

r

Ma

y

Ju

ly

Se

p

No

v

Ja

n

Ma

r

Ma

y

Ju

ly

Se

p

No

v

Ja

n

Ma

r

Ma

y

Ju

ly

Se

p

No

v

Ja

n

2012 2013 2014 2015 2016

Balance Export Import

2008 Feb581,1

2009 Feb410,1

2010 Feb473,8

2011 Feb650,1

2012 Feb518,3

2013 Feb729,5

2014 Feb877,4

2015 Feb910,9

2016 Feb1.054,9

300

400

500

600

700

800

900

1.000

1.100

1.200

Ja

nM

ar

Ma

yJ

uly

Se

pN

ov

Ja

nM

ar

Ma

yJ

uly

Se

pN

ov

Ja

nM

ar

Ma

yJ

uly

Se

pN

ov

Ja

nM

ar

Ma

yJ

uly

Se

pN

ov

Ja

nM

ar

Ma

yJ

uly

Se

pN

ov

Ja

nM

ar

Ma

yJ

uly

Se

pN

ov

Ja

nM

ar

Ma

yJ

uly

Se

pN

ov

Ja

nM

ar

Ma

yJ

uly

Se

pN

ov

Ja

n

2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: SORS

Contributions to export growth rates, in pp

Developments in exports and imports, by economic destination of the EU

24

• Exports activitity in Q4 (up by 6.0%) is slightly slowed downcompared to previous quarters;

• Exports of goods growth was mostly due to growth of intermediategoods (due to growth in exports of electric motors and equipmentfor the distribution of electricity, rubber and plastics products,and chemicals);

• Observed by SITC*, vegetables and fruit, power-generatingmachinery and equipment and electrical machinery and apparatusmostly contributed to the growth of exports, while drop of exportsof cereals, road vehicles and iron and steel acted in the oppositedirection. Lower prices of raw materials on the world market areslowing exports growth (fall in prices of copper and steel).

* Standard International Trade Classification

Contributions to import growth rates, in pp

• Besides unclassified goods, the growth of imports in Q4 (up by6.7%) was due to growth of non-durable and durable consumergoods and capital goods. Decrease in imports of energy andintermediate goods acted in opposite direction;

• The fall in oil prices in the world market has affected the importof oil and oil derivatives whose value expressed in euroscontinued to decrease to 26.4 in Q4%;

• The energy sector has recovered from last year's floods. Due tothe increase in electricity production, imports of this energysource in Q4 reduced by 40.5%.

-20

-10

0

10

20

30

40

50


2012 2013 2014 2015

in p

p

Unclassified by MIG destination Non-durable consumer goods

Durable consumer goods Capital goods

Intermediate goods, except energy Energy

Total export

-10

-5

0

5

10

15


2012 2013 2014 2015

in p

p

In the first two months of 2016 foreign trade was significantly improved. Export of goods increased by 12.8% and import by 4.3%. In the same period, deficit is reduced significantly (down

by 18.2%), with higher export-imports ratio (78.3%)

25

• The largest categories of export in the period January-February 2016

were motor vehicles, food products and rubber and plastic products (together

make up 36% of exports);

• Observed by economic destination of EU, growth in exports of all

groups had a positive impact on export trend, but the strongest one gave

higher growth of intermediate and capital goods;

• Production of motor vehicles, electrical equipment and chemicals and chemical

products are the sections with the largest positive contribution to the export

growth;

• Most important export product are still motor vehicles, with a share of

13.8% in total exports.

• The largest categories of import in the period January-February

2016 were chemicals and chemical products, motor vehicles, crude petroleum

and natural gases, with a share of 27.1% in total imports);

• Observed by economic destination of EU, growth in exports of

unclassified and intermediate goods had a positive impact on

import trend, while a sharp drop of energy import (down by 30.8%), due to

lower oil and gas prices on the world market;

• Besides unclassified goods, in the first two months robust growth in import

of other personal service activities determined growth of total import.

Source: SORS

Contributions to export growth rates, in pp Contributions to import growth rates, in pp

12,8

-35

-25

-15

-5

5

15

25

35

2008 2009 2010 2011 2012 2013 2014 2015 2016 I-II

Energy Intermediate goods, except energy Capital goods Durable consumer goods

Non-durable consumer goods Unclassified by MIG destination Total export

4,3

-35

-25

-15

-5

5

15

25

35

2008 2009 2010 2011 2012 2013 2014 2015 2016 I-II

Source: Customs Administration

Exports and imports of passenger cars, mill. EUR

The total export value of 15 largest exporters in Q1 2016amounted to EUR 981.1 million

Source: SORS 26

Biggest exporters

15 BIGGEST EXPORTERS IN PERIOD JANUARY-MARCH 2016

NAME OF THE EXPORTER LOCATIONExport

(EUR mill)

FCA SRBIJA KRAGUJEVAC312,4

TIGAR TYRES PIROT85,0

ŽELEZARA SMEDEREVO

SMEDEREVO55,4

PHILIP MORRIS OPERATIONS

NIŠ51,6

JUGOIMPORT - SDPR BEOGRAD44,6

HIP - PETROHEMIJA PANČEVO44,4

NAFTNA INDUSTRIJA SRBIJE

NOVI SAD41,7

TETRA PAK PRODUCTION

BEOGRAD40,0

YURA CORPORATION RAČA37,8

GORENJEVALJEVO, STARA PAZOVA 37,3

VICTORIA GROUP BEOGRAD, BEČEJ, ŠID36,1

MK GROUPNOVI SAD, VRBAS, PANČEVO, BEOGRAD 35,0

HEMOFARM VRŠAC34,4

LEONI WIRING SYSTEMS SOUTHEAST

PROKUPLJE33,8

DRUŠTVO ZA TRGOVINU ROBERT BOCH

BEOGRAD

28,8

118,4130,4 120,1

0

10

20

30

40

50

60

70

0

20

40

60

80

100

120

140

160

180

Ju

ly

Sep

t

No

v

Ja

n

Ma

r

Ma

y

Ju

ly

Sep

t

No

v

Ja

n

Ma

r

Ma

y

Ju

l

Sep

No

v

Ja

n

Ma

r

Ma

y

Ju

l

Sep

No

v

Ja

n

2012 2013 2014 2015 2016

Export Import (right-hand scale)

Exports and imports by sections of SITC,

February 2016 (mill. EUR)

27

The ten largest foreign trade partners of Serbia,

February 2016 (mill. EUR)

Exports and imports by economic destination, February 2016 (mill. EUR)

Source: SORS

0,0

737,8

976,0

190,1

Unclassified byBEC destination

Consumer goods

Intermediate goods

Capital goods

571,7

402,2

1.204,8

262,1

1.000 800 600 400 200 0 0 200 400 600 800 1.000 1.200

28,7

31,4

28,7

20,6

25,8

63,3

1,6

47,1

121,9

146,0

31,0

30,8

36,8

46,8

45,5

16,9

103,6

133,9

118,8

105,9

150 100 50 0 0 50 100 150

Total export1,905.8mill. EUR

Total import2,433.4mill. EUR

36,0

265,8

604,3

385,3

166,6

22,3

44,9

51,5

61,4

267,6

Commodities and transactions not

specified in the SITC Rev. 4

Miscellaneous manufactured articles

Machinery and transport …

Manufactured goods classified chiefly by

material

Chemicals and related products,n.e.s.

Animal and vegetable oils,fats and waxes

Mineral fuels,lubricants and related materials

Crude materials,inedible,excep

t fuels

Beverages and tobacco

Food and live animals

464,6

168,7

602,9

382,4

352,4

4,9

222,2

90,7

28,9

115,7

600 500 400 300 200 100 0 0 100 200 300 400 500 600

Source: SORS

• Five most exported groups of products were: roadvehicles, electrical machinery and apparatus,vegetables and fruit, non-ferrous metals and articles ofapparel valued EUR 693.7 million (36.5% of totalexports).

Structure of export, February 2016 (in %) Structure of import, February 2016 (in %)

• Unclassified goods, road vehicles and electrical machineryand apparatus make 33.4% of total import;

• Surplus in February 2016 amounted EUR 303.0 million(28% more then in February 2015) has been realized infollowing sectors: food and live animals, miscellaneousitems, beverages and tobacco, and animal and vegetable oilsand fat, manufacturing products and machinery andtransport equipment.

Road vehicles are still the most exported goods with share in total export of goods of 13.8%

28

Road vehicles13,8

Electrical machinery, apparatus and

appliances8,2

Vegetables and fruit5,5

Non-ferrous metals4,7

Articles of apparel and clothing accessories

4,3

Cereals and cereal preparations

4,2Rubber manufactures4,1

Power-generating machinery and

equipment4,0

Other51,2

Unclassified goods19,1

Road vehicles10,0

Electrical machinery, apparatus and

appliances4,3

Gas4,1

Petroleum, petroleum products

3,9

Medicinal and pharmaceutical

products3,3

General industrial machinery and

equipment3,0

Paper, paperboard and articles of paper pulp

2,9

Other49,4

Source: SORS

• The largest trading partners are Italy and Germany. Exports to these countries accounted for 31.2% of total exports and for23.6% of total imports;

• The most favorable exchange took place with neighboring countries (Bosnia and Herzegovina, Montenegro, Macedonia,Romania, Bulgaria) but also Italy, Slovakia and Great Britan. In February 2015, Serbia recorded a surplus of 320 millioneuros in goods trade with these countries.

Countries share in total exports of Serbia,

February 2016 (in %)

Countries share in total imports of Serbia,

February 2016 (in %)

The overall external trade of Serbia in February 2015 amounted aroundEUR 2.4 bn, which is increase of over EUR 229.8 mill (10.5%)

29

Italy17,4

Germany13,8

Bosnia and Herzegovina

7,7

Russian Federation5,5

Romania4,5Republic of Montenegro

3,7

Republic of Macedonia3,3

Slovenia3,3

Other countries40,8

Germany 12,5

Italy 11,1

Russian Federation

9,9

China 9,6

Hungary 4,4Poland

4,2

France 3,4

Republic of Slovenia 3,0

Other countries41,9

Source: SORS

Share of export to EU of total export, February (in %)

Share of import from EU of total import, February (in %)

Foreign trade between Serbia and EU

30

Deficit in foreign trade with EU, million euros

(2008-2016)

Export and import to and from EU, 2010-2016(million euros)

EU68,8

Other countries

31,2

2016

EU69,0

Other countries

31,0

2015

EU63,3

Other countries

36,7

2016

EU60,9

Other countries

39,1

2015

720,7

903,5

200

350

500

650

800

950

1.100

1.250

I V IX

I V IX

I V IX

I V IX

I V IX

I V IX

I

2010 2011 2012 2013 2014 2015 2016

mil

lio

n e

uro

s

Извоз у EУ Увоз из ЕУ

-552,1 -488,2 -352,8 -342,0 -442,7 -390,0 -245,7 -255,1 -231,0

-4.500

-4.000

-3.500

-3.000

-2.500

-2.000

-1.500

-1.000

-500

0

I

I-II

I

I-V

I-V

II

I-IX

I-X

I I

I-II

I

I-V

I-V

II

I-IX

I-X

I I

I-II

I

I-V

I-V

II

I-IX

I-X

I I

I-II

I

I-V

I-V

II

I-IX

I-X

I I

I-II

I

I-V

I-V

II

I-IX

I-X

I I

I-II

I

I-V

I-V

II

I-IX

I-X

I I

I-II

I

I-V

I-V

II

I-IX

I-X

I I

I-II

I

I-V

I-V

II

I-IX

I-X

I I

2008 2009 2010 2011 2012 2013 2014 2015 2016

in m

illi

on

EU

R

Since the beginning of the year reduction in external balance is continued. Better terms of trade, as well as low oil prices and a recovery in external demand will contribute to the improvement of the

current account. It is estimated a further reduction in the current account deficit in 2016, along with full coverage of foreign direct investment inflows.

** Current account deficit and FDI are calculated according to balance of payments BPM5 methodology for 2002-2011. For 2012 and 2013 calculations are based on BPM6 methodology.

Current account deficit and foreign direct investment, % of GDP**

31

Current account structure, billion euros

Source: NBS

-1,5

-10

-9

-7

-6

-4

-3

-1

1

2

4

bil

lio

n€

Goods Services

Primary income Secondary income

Current account balance

*MoF estimate

4,4

0

2

4

6

8

10

12

14

16

0

3

6

9

12

15

18

21

Current account deficit

Foreign direct investments - right-hand scale

• In February 2016, the current account deficit was EUR108.8 million, compared to a deficit of EUR 176.2 million inthe same month of 2015;

• Trade deficit decreased by EUR 74 million, while the surplusin services balance decreased by EUR 11.5 million.

Source: NBS

The structure of financial balance, mill. EUR

• The total inflow of foreign direct investment in thefirst two months amounted to EUR 227.8 million;

• At the same time, portfolio investments recorded anet outflow in the amount of EUR 220.3 million.

Since the begging of the year the balance of payments position of the country has significantly improved. The current account deficit in the first two months amounted to 86.4 mil. euros and

was by almost two thirds lower (down by EUR 152.7 mill.) compared to the same period of 2014. The improvement of the current account was due to better terms of trade.

* Included intercompany loans and reinvested earnings.

32

Balance of payment, mill. EUR

-108,8

-800

-600

-400

-200

0

200

400

600

Ja

n

Ma

r

Ma

y

Ju

ly

Se

p

No

v

Ja

n

Ma

r

Ma

y

Ju

ly

Se

p

No

v

Ja

n

Ma

r

Ma

y

Ju

ly

Se

p

No

v

Ja

n

2013 2014 2015 2016

Goods and services balance Primary income

Secondary income Current account deficit

16,5

-1.300

-1.100

-900

-700

-500

-300

-100

100

300

500

700

900

1.100

1.300

Ja

n

Ma

r

Ma

y

Ju

ly

Se

p

No

v

Ja

n

Ma

r

Ma

y

Ju

ly

Se

p

No

v

Ja

n

Ma

r

Ma

y

Ju

ly

Se

p

No

v

Ja

n

2013 2014 2015 2016

Reserve assets(- sign for increase)Other investment

Financial derivatives (other than reserves) and employee stock options

Portfolio investment

Direct investment

Financial account

* Current transfers between resident and nonresident households

Structure of services export, mill. EUR

In the structure of exports and imports of services prevail transport services, tourism, IT and other business services. In the first two months of 2016, inflow from personal transfers amounted to 320.4 mil. EUR

33

Structure of services import, mill. EUR

Personal transfers* and workers’ remittances, mill. EUR

Извор: НБС

-10

-5

0

5

10

15

20

0

200

400

600

800

1.000

1.200

1.400


2012 2013 2014 2015

%

mil

l. E

UR

TransportTravelTelecommunications, computer, and information servicesOther business servicesExport of other servicesExport of services, growth rate, right-hand axis

-10

-5

0

5

10

15

0

200

400

600

800

1.000

1.200


2012 2013 2014 2015

%

mil

l. E

UR

TransportTravelTelecommunications, computer, and information servicesOther business servicesImport of other servicesImport of services, growth rate, right-hand axis

126,1208,2

182,7 162,4 193,6


3,0

4,0

5,0

6,0

7,0

8,0

9,0

10,0

0

50

100

150

200

250

300

350

400

450

500

I

III V

VII IX XI I

III V

VII IX XI I

III V

VII IX XI I

III V

VII IX XI I

2012 2013 2014 2015 2016

%G

DP

mil

l. E

UR

Personal transfers* Workers' remittances Personal transfers*, share in GDP, right-hand axis

Foreign direct investments in manufacturing in 2015, by branch of activity, mill. EUR

• From the standpoint of ensuring sustainable growth in future, a new investment inflow that came to Serbia in 2015 wassignificantly more favorable. Dispersion of investment by the manufacturing industry is much wider, which provides the basisfor growth of the industrial sector and exports in the coming period;

• From the standpoint of sectoral structure, FDI inflow is more favorable than in 2014, as the share of FDI in export-orientedsectors (agriculture, manufacturing, transport and accommodation and food services) in the total net inflow increased frommore than one third in 2014. to 40.7% in 2015. 34

Net inflow of foreign direct investments in 2015 amounted to 1.8 bill. EUR, which is an increase of 45.6% compared to 2014.

Foreign direct investments in manufacturing in 2015, by branch of activity, mill. EUR

• Over 82% of FDI inflow in 2015 came from countries ofthe European Union;

361,8

351,5

169,6

144,1

121,6

88,4

86,1

257,5

Netherlands Austria Luxembourg

Italy United Arab Emirates Russian Federation

Switzerland Other countries

122,9

65,1

66,6

65,0

141,9

140,5

119,1

Food products, beverages and tobacco products

Textiles and wearing apparel

Chemicals and chemical products

Basic pharmaceutical products and pharmaceutical preparations

Rubber and plastic products

Motor vehicles, trailers and semi trailers

Other manufacturing

External debt

• Total external debt at the end of 2015amounted to EUR 26.35 billion which iscompared to the end of previous year increaseby EUR 678 million. The increase in debt in2015 was influenced by the strengthening ofthe dollar against the euro. But on the otherhand the growth of debt in this period wasmainly influenced by the withdrawal of fundsfor the reconstruction of damage caused byfloods and for the construction of a new blockin power plant “Kostolac B”;

• Compared to the end of 2014 in December2015 private sector external debt decreased byEUR 466 million and amounted to EUR 11.1billion, while public sector external debtincreased by EUR 1.1 billion and amounted to15.3 billion;

• Indicator of solvency - external debt to GDPratio worsened in the fourth quarter of 2015,compared to previous quarter.Source: NBS

External debt, in million EUR

35

81,0

74,8

77,1

80,1

66

68

70

72

74

76

78

80

82

84

0

5.000

10.000

15.000

20.000

25.000

30.000


2012 2013 2014 2015

Public sector Private sector Total (% of GDP, right-hand scale)

INFLATION,EXCHANGE RATE, AND

MONETARY DEVELOPMENTS

• Annual inflation growth in March was mainlyinfluenced by the price increase of industrialproducts, excluding food and energy, services andprocessed food. Growth of inflation in this periodwas primarily consequence of increased prices oftobacco, electric energy and travel arrangements.

Source: RSO, NBS

Contributes to the monthly inflation percentage points

• In March was recorded decrease in prices by 0.1%. Pricedevelopments in this month marked the decrease in prices ofunprocessed food and services, while non-significant growth wasrecorded within processed food, energy and industrial products,excluding food and energy. The decrease of prices in March wasmainly driven by the decrease in prices of fresh vegetables and to alesser extent travel arrangements;

• Regulated prices increased by 0.1% compared to February, becauseof price growth of medicaments. Compared to March 2015,regulated prices registered growth, primarily led by the growth ofprices of tobacco and electrical energy.

Annual inflation in March totaled 0.6% which is below the lower limit of the target tolerance band (4 ± 1.5%). NBS in April decided to keep key interest rate at the level of

4.25%.

Inflation, annual growth rate, %

37

0

2

4

6

8

10

12

14

16

Ja

n

Ap

r

Ju

l

Ok

t

Ja

n

Ap

r

Ju

l

Ok

t

Ja

n

Ap

r

Ju

l

Ok

t

Ja

n

Ap

r

Ju

l

Ok

t

Ja

n

Ap

r

Ju

l

Ok

t

Ja

n

Ap

r

Ju

l

Ok

t

Ja

n

2010 2011 2012 2013 2014 2015 2016

Key policy rate Consumer prices, YoY

Inflation target, YoY Inflation band

-1,0

-0,6

-0,2

0,2

0,6

1,0

1,4

Ja

n

Feb

Ma

r

Ap

r

Ma

y

Ju

n

Ju

ly

Au

g

Se

p

Oct

No

v

Dec

Ja

n

Feb

Ma

r

2015 2016

Pre

vio

us

mo

nth

=10

0

Services

Energy

Industrial goodsexcluding food andenergyProcessed food

Unprocessed food

TOTAL

38

Consumer prices in Q1 2016

Inflation, quarterly growth rates, in %

Contributions to quarterly inflation rate, pp

• During the first quarter, consumer prices registeredincrease. Positive contribution to the pricedevelopments in this period came from the prices offood (particularly fresh vegetables and fruits). At thesame time influence from the opposite direction camefrom the prices of energy (oil derivatives), services(travel arrangements) and industrial products withoutfood and energy (clothing and footwear).

Source: SORS

Inflation, annually growth rates, in %

1,1

1,8

-0,5-0,2

1,2

0,8

0,3

-0,6

1,4

0,7

-0,1

-0,5

0,4

-1,0

-0,5

0,0

0,5

1,0

1,5

2,0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2013 2014 2015 2016

11,2

9,8

4,9

2,2 2,3

1,2

2,11,7 1,9 1,9

1,4 1,5

0,6

0

2

4

6

8

10

12

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2013 2014 2015 2016

-1,2

-0,9

-0,6

-0,3

0,0

0,3

0,6

0,9

1,2

1,5

1,8

Q1 Q2 Q3 Q4 Q1

2015 2016

Unprocessed food Processed food Energy Industrial products (food and energy excluded) Services

• Developments on the foreign exchange market in March 2016 compared to previous month were characterized by a nominal appreciation(0.5%) and real depreciation of the dinar against the euro (-0.9%);

• In March 2016 compared to the same month of the previous year dinar recorded nominal and real depreciation (-2.2% and -1.6%,respectively);

• Real Effective Exchange Rate in March registered depreciation of 1.2% yearly, which positively influenced external price competitiveness of theeconomy;

• In the first three months NBS intervened on the foreign exchange market by selling EUR 565 million, net.

Source: NBS

Real and nominal exchange rate, indices December 2010=100

Movements in the exchange rate and NBS interventions on the foreign exchange market

In order to mitigate excessive short-term fluctuations of the exchange rate NBS in March intervened on the foreign exchange market, by selling foreign currency in

amount of EUR 175 million, net.

39

75

80

85

90

95

100

105

110

115

120

Dec

Feb

Ap

r

Ju

n

Au

g

Oct

Dec

Feb

Ap

r

Ju

n

Au

g

Oct

Dec

Feb

Ap

r

Ju

n

Au

g

Oct

Dec

Feb

Ap

r

Ju

n

Au

g

Oct

Dec

Feb

Ap

r

Ju

n

Au

g

Oct

Dec

Feb

2010 2011 2012 2013 2014 2015 2016

Average exchange rates EUR/RSD, real terms

Average exchange rates EUR/RSD, nominal terms

-300

-200

-100

0

100

200

300

400

500

600

95

100

105

110

115

120

125

Ja

n

Ap

r

Ju

l

Oct

Ja

n

Ap

r

Ju

l

Oct

Ja

n

Ap

r

Ju

l

Oct

Ja

n

Ap

r

Ju

l

Oct

Ja

n

Ap

r

Ju

l

Oct

Ja

n

2011 2012 2013 2014 2015 2016

NBS intervention, mill. EUR, net (right-hand scale)

Average exchange rates EUR/RSD

Main monetary aggregates development

Source: NBS

Monetary aggregate М3

40

• All monetary aggregates in March areregistering growth on yearly basis. Thus,the broadest monetary aggregate M3recorded a nominal growth of 7.9%. Atthe same time, monetary aggregates M1and M2 recorded increase of 23.5% and13.7%, respectively. Decline of dinarreserve money on yearly basis for thefirst time since May 2014 was recorded,due to the selling of foreign currency bythe NBS on the foreign exchangemarket;

• The biggest impact on the growth of M3in this period had an increase indemand deposits and foreign currencydeposits.0

500

1.000

1.500

2.000

2.500

3.000

3.500

bil

lio

n R

SD

Money supply M1 Time dinar deposits Foreign currency deposits

Interest rates on bank dinar loans follow the trend of lowering key interest rates. In February, the interest rate corridor in relation with key interest rate was reduced from ± 2 p.p. to ± 1.75 p.p,

which will contribute to further strengthening of the transmission of monetary policy measures through the interest rate channel

• Monetary easing in 2015 have contributed tothe continuation of the fall in interest rates onloans in dinars at the beginning of 2016. Inthat period bank lending activity wascharacterized by the growth rate (2.1%). In thisperiod borrowed funding sources increasedand external funding sources decreased.Observed by the currency structure foreigncurrency share in total funding sourcesdecreased;

• In the third quarter share of non-performingloans in total loans amounted to 22%, which iscompared to the same quarter of 2014decrease by 1 pp.

Source: NBS and SORS

GDP and lending activity, yearly growth rates

Non-performing loans, billion RSD

* Domestic credits after exclusion of the effect of exchange rate and price changes

41

21,4%22,2% 23,0% 23,0%

21,5%22,6% 22,8% 22,0%

0%

5%

10%

15%

20%

25%

0

50

100

150

200

250

300

350

400

450

500

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2013 2014 2015

Economy Households Other NPL % (gross)

-15

-10

-5

0

5

10

15

20

25

30

35

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2008 2009 2010 2011 2012 2013 2014 2015

GDP Domestic credits*

In March was registered slight decrease of loans on yearly basis. At the same time loans to economy registered decline of 0.1%, while loans to households registered accelerated growth of 5.4%. In this period overall growth of credit activity was influenced

totally by the growth of loans to households. Observed by purpose, the growth of loans to households in March was mostly influenced by the growth of cash credits. On the other hand the growth of bank lending activity to the economy were mainly

influenced by the growth of investment loans (8.5%).Тhe interest rate on total newly approved dinar loans in March decreased by 7.0 pp y-o-y, with an increase in loans by around 36%.

Source: NBS

Growth rates of loans to economy and households, yearly growth rates

Contribution to y-o-y loan activity rate

42

Newly approved loans to economy, by purpose, in billion dinars

Newly approved loans to households, by purpose, in billion dinars

-15

-10

-5

0

5

10

15

20

25

Ja

nF

ebM

ar

Ap

rM

ay

Ju

nJ

ul

Au

gS

epO

ctN

ov

Dec

Ja

nF

ebM

ar

Ap

rM

ay

Ju

nJ

ul

Au

gS

epO

ctN

ov

Dec

Ja

nF

ebM

ar

Ap

rM

ay

Ju

nJ

ul

Au

gS

epO

ctN

ov

Dec

Ja

nF

ebM

ar

Ap

rM

ay

Ju

nJ

ul

Au

gS

epO

ctN

ov

Dec

Ja

nF

ebM

ar

2012 2013 2014 2015 2016

Economy Households

-10

-5

0

5

10

15

20

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2012 2013 2014 2015 2016

Economy Households Total

0

20

40

60

80

100

120

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

2015 2016

Investment Other Liquidity and current assets

0

5

10

15

20

25

30

35

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

2015 2016

Housing Consumer Cash Other

Foreign exchange reserves of the NBS decreased in March compared to previous month by around EUR 350 million and were sufficient for

coverage of six months of goods and services import.

Source: NBS, calculated in MoF

Foreign exchange reserves and coverage of import of goods and services

43

• Foreign exchange reserves at he end of March 2016 decreasedyearly by EUR 1 billion and totaled EUR 9.5 billion;

• The largest outflow of foreign currency in March was achievedthanks to payment of obligations to foreign creditors and theredemption of maturing euro-denominated RS securities;

• Level of NBS foreign exchange reserves was sufficient forcoverage of monetary aggregate M1 of 238%.

7.000

7.200

7.400

7.600

7.800

8.000

8.200

8.400

8.600

8.800

8.000

8.500

9.000

9.500

10.000

10.500

11.000

11.500

12.000

Ja

n

Ma

r

Ma

y

Ju

l

Se

p

No

v

Ja

n

Ma

r

Ma

y

Ju

l

Se

p

No

v

Ja

n

Ma

r

Ma

y

Ju

l

Se

p

No

v

Ja

n

Ma

r

Ma

y

Ju

l

Se

p

No

v

Ja

n

Ma

r

2012 2013 2014 2015 2016

NBS Foreign exchange reserves

Foreign currency savings (right-hand scale)

3

4

5

6

7

8

9

10

0

2

4

6

8

10

12

14

mo

nth

s

bil

lio

n€

NBS Foreign Exchange Reserves (left-hand scale)

In months of import of goods and services (right-hand scale)

FISCALDEVELOPMENTS

The consolidated deficit in Q1 2016 amounted to 16 bln RSD, compared to 21.2 bln RSD in Q1 2015.

Source: Ministry of Finance

Consolidated general government revenues, expenditures, fiscal balance, in bln RSD, monthly

45

-41,5

-25,4 -25,1

-100

-90

-80

-70

-60

-50

-40

-30

-20

-10

0

10

20

30

40

0

20

40

60

80

100

120

140

160

180

200

220

240

260

2014 2015 2016

CONSOLIDATED BALANCE(right scale) PUBLIC REVENUE PUBLIC EXPENDITURES

46


The movement of the main categories of revenues and expenditures in 2015 and 2016

Public revenues in January-March 2015 and 2016

Public expenditures in January-March 2015 and 2016

* not including activated guarantees for PE Roads of Serbia, which are included in foreign debt repayment

6,02,7

7,9

24,0

9,0

12,5

4,2

10,0

0

5

10

15

20

25

30

0

20

40

60

80

100

120

140

Personal incometax

Corporate incometax

Value added tax Excises Customs Other tax revenue Socialcontributions

Non-tax revenue

%

in R

SD

bln

.

2015 2016 Nominal growth

1,1

12,9 13,2

-3,7

3,1

31,9

66,2

27,2

-10

0

10

20

30

40

50

60

70

0

20

40

60

80

100

120

140

160

180

Expenditure foremployees

Purchase of goodsand services

Interest payment Subsidies Social assistanceand insurance

Other currentexpenditure

Capitalexpenditures

Net lending andactivated

guarantees*

%

in R

SD

bln

.

2015 2016 Nominal growth

47

The downward trend in primary fiscal deficit was initiated during the Q2 2012. If we look at the primary fiscal result - fiscal consolidation measures persistence can be seen during the most part of 2015. In Q1 2016 primary

surplus of about 3.3% of GDP* was achieved, while at the same time general government deficit of 1.8% of GDP* was recorded.

Source: Ministry of Finance, *Mof estimation of Q1 GDP

The deficit of the general government and primary result, quarterly 2010 - 2016, in bln RSD

-120

-100

-80

-60

-40

-20

0

20

40Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2010 2011 2012 2013 2014 2015 2016

Fiscal balance Primary fiscal balance

Indirect taxes account for 41% of consolidated revenues, while highest share on the expenditure side belongs to expenditures for

employees and pensions - 51.6%


Structure of consolidated general government expenditures in January-March 2016, in %

Structure of consolidated general government revenues inJanuary-March 2016, in %

48

Personal income tax

8,3% Corporate income tax

3,2%

Value added tax25,0%

Excises13,9%

Customs2,1%

Other tax revenues

3,6%

Social contributions

29,1%

Non-tax revenues

14,5%

Grants0,3%

Expenditure for employees

23,2%

Purchase of goods and

services13,3%

Interest payment

10,7%Subsidies

4,2%

Pensions28,4%

Unemployment benefits

0,6%

Sick leave0,6%

Social assistance and other

transfers to households

10,4%

Other current expenditure

2,5%

Capital expenditures

4,0%

Activated guarantees

2,0%Net lending

0,1%

Republic Budget accounts for 57.1% of consolidated revenues and 41.5% of consolidated expenditures

Structure of consolidated revenues by levels of government in January-March 2016, in %*


Structure of consolidated expenditures by levels of government in January-March 2016, in %*

49

Republic Budget57,1%

Pension Insurance Fund

20,4%

Health Fund8,0%

Unemployment Fund1,1%

Military Health Fund0,1%

Road Fund**0,9%

Local Government

12,3%

* Тransfers from other levels of government not included** PE Putevi Srbije and Koridori Srbije Ltd.

Republic Budget41,5%

Pension Insurance Fund

30,3%

Health Fund10,6%

Unemployment Fund1,1%

Military Health Fund0,3%

Road Fund**2,2%

Local Government

14,1%

* Тransfers to other levels of government not included** PE Putevi Srbije and Koridori Srbije Ltd.

50

Contributions of revenue components to general government revenues annual growth rate, in pp, in January-March 2016


Social contributions and VAT as the main components of general government revenues in most cases affect the annual growth rate in the period. In 2015, the revenue trend was mainly caused by the movement of non-tax revenue categories. Total expenditure in the period from 2006 to 2013, were mostly influenced by pensions and social benefits. Reduction of salaries in 2015 contributes to the

decline in overall expenditures. At the same time, reducing pensions resulted in overall expenditures decrease but this was compensated by the growth of other social transfers. During Q1 2016 revenue growth was pushed mostly by the growth of indirect taxes

while expenditure growth mainly comes from the increase in capital expenditure, which is found preferable.

Contributions to general government expenditures annual growth rate, in pp,in January-March 2016. (subsidies include net lending and activated guarantees)

-5

0

5

10

15

20

25

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

p.p

.

Personal income tax Corporate income tax

VAT Excises

Customs Social security contributions

Other tax revenues Non-tax revenues and grants

Total

-10

-5

0

5

10

15

20

25

30

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

p.p

.

Wages and salaries Goods and services (incl. other current)

Interest payment Subsidies

Pensions Social transfers

Capital expenditures Total

51

Primary fiscal balance records a significant drop from 2012 onwards, both as a share of GDP and in absolute terms. Regarding relative change in the share of revenues,

expenditures and fiscal balance, in 2015 both expenditures and revenues movements contributed to overall fiscal balance improvement

General government deficit and the primary deficit 2012 -2015, % of GDP and absolute levels


-1,5-1,9

-2,6

-4,4-4,6

-4,8

-6,8

-5,5

-6,6

-3,8

-0,2

-1,3

-2,1

-3,8 -3,6 -3,6

-5,0

-3,1

-3,8

-0,5

-8,0

-7,0

-6,0

-5,0

-4,0

-3,0

-2,0

-1,0

0,02006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Balance in GDP (augmented) Primary balance in GDP

-2,6

-0,4 -0,7

-1,8

-0,2

-0,2

-2,0

1,4

-1,1

2,9

-4,0

-3,0

-2,0

-1,0

0,0

1,0

2,0

3,0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Revenues Expenditures Fiscal balance

Revenues and expenditures dynamics contribution to fiscal balance movements, in % GDP (negative = deficit increase)

bln din 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Fiscal balance

18,7 -30,9 -45,0 -72,0 -127,1 -141,0 -163,5 -245,2 -212,1 -258,1 -148,6

Primary balance

35,4 -3,3 -31,3 -56,4 -108,6 -109,9 -121,8 -180,1 -121,7 -147,3 -20,3

52

Relative movement regularity in the fiscal deficit and net financing accompanied with the accumulation of liquidity after 2011. Successful

fiscal consolidation in 2015 resulted in less need for net financing in 2015.

The financing structure and fiscal deficit, in bln RSD


-50

0

50

100

150

200

250

300

-600

-400

-200

0

200

400

600

800

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Financial inflows Financial outflows

Net financing Fiscal deficite

VAT & social contributions take the lion’s share of consolidated revenues. During the period a significant increase of excises was recorded, while share of customs was reduced due to the

implementation of the SAA. Share of CIT at the same time recorded a slight increase. Changes in tax rates led to a relative change in the share between social contributions and PIT.

Structure of consolidated revenues, from 2005 to 2015, in %


Share of consolidated revenues in GDP, from 2005 to 2015, in %

53

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

VAT Personal income tax CIT

Excises Customs Social contributions

Other tax revenues Non-tax and donations

10,5

3,7

1,6

5,9

0,8

12,7

0,6

6,8

0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015%

GD

P




Expenditures for employees & pensions take the largest portion in the structure of consolidated expenditures. Fiscal consolidation measures have led to a gradual fall in the share of these

expenditures by the end of the period. There is a negative trend when it comes to share of capital expenditures accompanied with the increasing share of interest repayments.

Structure of consolidated expenditures, from 2005 to 2015, in %


Share of consolidated expenditures in GDP, from 2005 to 2015, in %

54

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015




10,5

3,7

1,6

5,9

0,8

12,7

0,6

6,8

0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

% G

DP




55

Cumulative y-o-y VAT growth rates (indices)

In 2015, there has been a satisfactory growth rate of gross VAT collected, despite the fiscal consolidation measures, a certain slowdown was recorded in the second half of the year.

Stronger exports growth in 2015 influenced the movement and growth of VAT refunds. During 2016, due to legislative changes, changes in the structure of collection between the imported

and domestic component of VAT may occur.


Gross VAT, net VAT and VAT refunds growth rates, 2007-2015

-30

-20

-10

0

10

20

30

40

2007 2008 2009 2010 2011 2012 2013 2014 2015

%

Net VAT VAT Refunds Gross VAT95

100

105

110

Ja

n

Feb

Ma

r

Ap

r

Ma

y

Ju

n

Ju

l

Au

g

Sep

Oct

No

v

Dec

Ja

n

Feb

Ma

r

Ap

r

Ma

y

Ju

n

Ju

l

Au

g

Sep

Oct

No

v

Dec

Ja

n

Feb

Ma

r

2014 2015 2016

Gross domestic VAT

Gross total VAT

The impact of floods in mid-2015 –domestic VAT falls faster due to energy imports

56

Gross collection, net VAT an VAT refunds, 2006 - 2015, in bln RSD

Since the introduction of VAT gross collection growth is slightly faster than the growth of net VAT collected due to increased share of VAT refunds. The reasons can be found in a stable relationship between the share of

exports in GDP and the share of the refunds in gross collection. Several analyses indicate to a solid relationship between the aggregate population income* and gross VAT collection not on both yearly and quarterly basis.

Probable causes of such behavior lie in the low level of income and the low propensity to save.


Relations between particular macroeconomic variables and indicators of VAT collection and refunds

Aggregate population income* represents approx consumption based on approximate sum of wages, pensions, social benefits and other personal income (without loans, remittances and other sources of income)

Positive correlation becomes even stronger when exports (in RSD) are included in relation. Indirect reason for this is because of exports’ impact on economy as a whole. Direct impact comes from the import and domestic VAT components on gross VAT collection, which is approximately around 30%.

Availability and frequency of this data is a very useful tool for prompt analysis and VAT estimates and projections review.

Movement of VAT refunds (share in gross VAT collected) expectedly and substantially is in line with the GDP structure and its changes and share of exports in GDP. This can be used as an early export activity indicator.

The value of this coefficient is similar to the ones for peer economies.

2006

2008

2009

2014

2015

R² = 0,91

15

20

25

30

35

40

18 20 22 24 26 28

Ex

po

rt/G

DP

VAT refunds/gross VAT collection

Yearly data

0

100.000

200.000

300.000

400.000

500.000

600.000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Net VAT VAT Refunds Gross VAT

-15

-10

-5

0

5

10

15

20

25

30

2007 2008 2009 2010 2011 2012 2013 2014 2015

%

Gross VAT Income approx + export

y-o-y growth rates

-15

-10

-5

0

5

10

2007 2008 2009 2010 2011 2012 2013 2014 2015

∆ C/Y ∆ C - compliance efficiency

∆ Effective VAT rate ∆ VAT/Y

57

Development of consumption taxation and VAT collection efficiency (C-efficiency) indicators , 2006 - 2015

C-efficiency analysis in the observed period points to significant drop of consumption taxation efficiency after the beginning of WEC and moderate recovery during 2014 and 2015. Change in effective VAT rate is caused by turnover

composition and later also through legislative changes (standard and reduced rate). The 2015 is characterized by reduction in compliancy gap coupled with effective VAT rate drop, due to changes in turnover composition.

Извор: Министарство финансија

Turnover composition, effective* VAT rate (upper graph) and contributing factors to development of consumption taxation efficiency and VAT/Y share

(lower graph)

• VAT collection efficiency ratios represent the relationship between the actual and potential (theoretical) VAT collection, under certain circumstances.

• C – efficiency ratio represents potential PDV to actual PDV collected ratio. Potenital PDV is calculated by multiplying effective VAT rate and consumption (C+G). Fully effective tax collection under current tax rate system and consumption structure is presumed.

• Total C – efficiency ratio is obtained from the potential VAT that would have been achieved at full charge, by approving standard rate and not including VAT exemptions. As a result, two collection efficiency gaps can be derived from the total gap – policy gap and compliance gap.

• Policy gap reflects tax legislation and consumption structure ie movement of effective VAT rate and consumption structure, and is residual between total and compliance gap. Compliancee gap can indicate the untaxed amount of statistically included grey and black market.

• Consumption structure and its movement, together with VAT tax rate legislative impact the level of effective VAT rate

• *Effective rate calculated on basis of tax administration and customs administration data, thus not in line with international methodology.

Contributions to VAT/Y share yearly dynamics

0,00

0,05

0,10

0,15

0,20

0,25

0,30

0,35

0,40

0,30

0,40

0,50

0,60

0,70

0,80

0,90

1,00

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Policy gap (rhs) Compliance gap (rhs)

C-efficiency ratio - compliance C-efficiency ratio - total

10,5%

11,0%

11,5%

12,0%

12,5%

13,0%

13,5%

14,0%

0%

10%

20%

30%

40%

50%

60%

70%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Effective VAT rate (rhs) VAT Standard rate turnover

VAT Reduced rate turnover Non - taxable turnover

Presented eff. rates are result of MOF calculations and analysis of TA and Customs data

58

The share of expenditures for employees and pensions in % of totalrevenues


The ratio of expenditures for salaries and pensions to toal income is a relative indicator of the fiscal effort on the revenue

and expenditure sides. The beginning of fiscal consolidation can be seen after 2012 with strong adjustment that can be observed in 2015. The increment in the number of pensioners has slowed after 2012, primarily due to the smaller number of disability pensions (stricter requirements and better control). The relationship between the total pensions paid and the amount of personal income tax and contributions collected* (wage bill approx) shows the movement and sustainability of

pension expenditures financing (higher value = deterioration)

27,3%

26,5%26,8%

28,9%

29,7%

28,4%

29,5%30,0%30,1%

28,2%

24,7%

26,7%

25,8%24,8%

27,7%

32,3%

30,8%31,0%

32,2% 32,4%

31,3%

28,9%

20%

22%

24%

26%

28%

30%

32%

34%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Expenditures for employees Pensions

The share of revenue that goesto financing expendituresfor wages and pensions

1.064.380

312.357

359.205

50

55

60

65

70

75

80

85

0

200.000

400.000

600.000

800.000

1.000.000

1.200.000

1.400.000

1.600.000

1.800.000

2.000.000

2000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Survivor pension

Disability pension

Old age pension

Pensions total/Taxes on wages (right scale)

Pension recipients and structure for receiving pensions, the ratio of pension expenditures and taxes and contributions on salaries

59Source: Ministry of Finance

The structure of subsidies paid from the Republican Budget

Changes in tax policy have led to an increase in the share of direct taxes; increase of VAT rate has been neutralized by lower customs revenues, in 2015 greatest effect comes from non-tax revenues growth (dividends)

44,6% 45,2%46,7% 47,4% 47,2%

44,6%

42,4% 42,2%41,1% 41,5% 41,6% 41,8%

13,1% 12,6% 12,2%11,1% 11,2%

13,6%

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

35,0%

40,0%

45,0%

50,0%

2010 2011 2012 2013 2014 2015

Direct taxes Indirect taxes Non-tax revenues

7%

28%

19%

20%

12%

15%

10%

9%

8%

7%

13%

35%

34%

40%

39%

32%

20%

31%

16%

18%

14%

11%

20%

9%

8%

15%

27%

13%

14%

11%

30%

18%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2011

2012

2013

2014

2015

Q1 2016

economy roads agriculture railways public broadcasting other subsidies

60

Compensation of employees share in 2015 is about 0.2% higher than average share in 28 EU countries (2014)

Source: Ministry of Finance and EUROSTAT, 2014. data

Compensation of employees in Serbia an EU countries, % GDP

10,5

0

2

4

6

8

10

12

14

16

18

Cze

ch R

epu

bli

c

Ge

rma

ny

Ro

ma

nia

Lu

xe

mb

ou

rg

Slo

va

kia

Net

he

rla

nd

s

La

tvia

Lit

hu

an

ia

Un

ite

d K

ing

do

m

Bu

lga

ria

Irel

an

d

Ita

ly

Po

lan

d

Hu

ng

ary

Ser

bia

Au

stri

a

Sp

ain

Est

on

ia

Slo

ven

ia

Cro

ati

a

Po

rtu

ga

l

Gre

ece

Bel

giu

m

Sw

ed

en

Fra

nce

Cy

pru

s

Ma

lta

Fin

lan

d

De

nm

ark

% G

DP

EU (28)

61

Public revenue and expenditure in Serbia an EU countries, % GDP

Source: Ministry of Finance and EUROSTAT, 2014. data

42,4

0

10

20

30

40

50

60

70

Ro

ma

nia

Lit

hu

an

ia

Irel

an

d

La

tvia

Bu

lga

ria

Sp

ain

Po

lan

d

Un

ite

d K

ing

do

m

Slo

va

kia

Est

on

ia

Cze

ch R

epu

bli

c

Cy

pru

s

Ma

lta

Cro

ati

a

Se

rbia

Net

her

lan

ds

Po

rtu

ga

l

Ge

rma

ny

Lu

xem

bo

urg

Slo

ven

ia

Gre

ece

Hu

ng

ary

Ita

ly

Au

stri

a

Bel

giu

m

Sw

eden

Fra

nce

Fin

lan

d

Den

ma

rk

% G

DP

Total general government revenue, 2015

European Union (28 countries)

46,1

0

10

20

30

40

50

60

70

Ro

ma

nia

Lit

hu

an

ia

La

tvia

Est

on

ia

Irel

an

d

Bu

lga

ria

Slo

va

kia

Po

lan

d

Cze

ch R

epu

bli

c

Sp

ain

Ma

lta

Ge

rma

ny

Lu

xem

bo

urg

Un

ite

d K

ing

do

m

Se

rbia

Net

her

lan

ds

Cro

ati

a

Po

rtu

ga

l

Cy

pru

s

Gre

ece

Slo

ven

ia

Hu

ng

ary

Ita

ly

Au

stri

a

Sw

eden

Bel

giu

m

Den

ma

rk

Fra

nce

Fin

lan

d

% G

DP

Total general government expenditure, 2015

European Union (28 countries)

PUBLICDEBT

Public debt in February of 2016 amounted to EUR 24.4 billion, or 72.0% of GDP

Source: Public Debt Administration

Currency structure of public debtThe share of public debt to GDP of the Republic of Serbia*

* Refers to the central government debt

63

201,2

97,7

68,361,7

52,6 50,2

35,929,9 28,3

32,8

41,845,4

56,2

59,6 70,475,5

72

0

20

40

60

80

100

120

140

160

180

200

220In %

21,9%

40,9%

32,2%

0,6%3,8%

0,6%

RSD EUR USD CHF SDR Other

64

Public debt currency structure in period 2008 – March 2016

2,6%

12,8% 14,6% 16,1%19,1% 20,3% 21,4% 22,2% 21,9%

75,4%

66,3%60,0% 56,5% 50,8%

45,8% 41,7% 39,8% 40,9%

14,5% 13,2%

14,7% 18,4% 22,7%27,8% 31,5% 32,9% 32,2%

1,9%1,7%

1,4%1,2% 0,9%

0,7% 0,6% 0,6%5,3%4,8%

7,9% 6,8% 5,6% 4,6% 4,2% 3,9% 3,8%

2,3% 1,1% 1,0% 0,9% 0,6% 0,6% 0,5% 0,6% 0,6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2008 2009 2010 2011 2012 2013 2014 2015 III/2016

RSD EUR USD CHF SDR Other

Overview of Eurobonds issued in international financial markets

Source: Public Debt Administration

* The required rate of return on re-opening

Curve price/yield of Eurobonds 2021 of the Republic of Serbia Curve price/yield of Eurobonds 2017 of the Republic of Serbia

Issuer Coupon % Date of issue Maturity Fitch Rating S&P Rating The volume of emission

Republic of Serbia 2021 7,25% 9/21/2011 10g B+ BB- 1.000.000.000 USD

Republic of Serbia 2021 – re-opening*6,625% 9/27/2012 9g* B+ BB- 1.000.000.000 USD

Republic of Serbia 2017 5,25% 11/14/2012 5g B+ BB- 750.000.000 USD

Republic of Serbia 2020 4,875% 2/14/2013 7g B+ BB- 1.500.000.000 USD

Republic of Serbia 2018 5,875% 12.3.2013 5g B+ BB- 1.000.000.000 USD

Croatia 6,00% 11/26/2013 10g BB+ BB 1.750.000.000 USD

Slovenia 5,25% 2/18/2014 10g BBB+ A- 2.000.000.000 USD

Romania 4,875% 1/22/2014 10g BBB- BB+ 1.000.000.000 USD

Hungary 5,375% 3/25/2014 10g BB+ BB 2.000.000.000 USD

65

The interest rates of government securities in the domestic market

Overview of accepted rates of dinar government securities

66

2.79%

General Government Debt at the end of March 2016

General Government Debt Stock and Structure as of March 31th, 2016

67

EUR USD RSD GDP%

Direct Liabilities (A)

Internal Debt 9.068.381.105 10.264.504.481 1.114.726.213.104 26,7%

External Debt 13.081.348.675 14.806.784.204 1.608.018.245.248 38,6%

Direct Liabilities in Total 22.149.729.780 25.071.288.685 2.722.744.458.352 65,3%

Indirect Liabilities (B)

Internal Debt 553.754.361 626.794.800 68.069.977.936 1,6%

External Debt 1.737.652.030 1.966.849.082 213.600.006.961 5,1%

Indirect Liabilities in Total 2.291.406.391 2.593.643.882 281.669.984.897 6,8%

Non-Guaranteed Local Government Debt (C)

Internal Debt 287.077.407 324.943.041 35.288.846.693 0,8%

External Debt 123.039.180 139.268.101 15.124.529.673 0,4%

Non-Guaranteed Local Government Debt in Total 410.116.587 464.211.141 50.413.376.366 1,3%

Central Government Public Debt (A+B) 24.441.136.171 27.664.932.567 3.004.414.443.249 72,0%

General Government Public Debt (A+B+C) 24.851.252.758 28.129.143.708 3.054.827.819.615 73,3%

Documents

CURRENT MACROECONOMIC DEVELOPMENTS · Gross domestic product od Serbia and countries in the region 2006-2015 Source: Eurostat, National statistical offices of the countries in the