Experts believe currency will continue to weaken

Experts believe currency will continue to weaken

Ismail Musabegovic, professor at the Belgrade Banking Academy, estimated that the domestic currency would be weakening for the whole of 2015, most likely by half to one dinar against the euro every month.

Musabegovic said that the NBS was not defending the dinar exchange rate, but was easing its excessive daily volatility, and the real exchange rate was based on supply and demand.

“Serbia imports much more than it exports, so the demand for foreign exchange is higher that supply and therefore the dinar exchange rate will continue to decline slightly in 2015,” says Musabegovic.

Director of the Belgrade Institute of Economic Sciences Dejan Eric said that fears that the NBS would let the dinar exchange rate to drop sharply in the coming year were unfounded.

“The polls we conducted at the Institute of Economic Sciences show a close correlation between the exchange rate movements and inflation, and letting the exchange rate drop would result in an increase in the rate of inflation,” said Eric.

Inflation is below two percent this year, which is far below the lower band of the central bank’s target of 4 percent, plus or minus 1.5 percentage points ,said Eric.

“The main objective of the NBS is macroeconomic stability, which is especially important now that the cuts in public sector salaries and pensions and rigorous savings measures have been introduced,” Eric said.

The appreciable weakening of the dinar brought more harm than good to the domestic economy, he said.

“Serbia neither has quality products to export nor a strong export sector, and as long as things remain that way, we will have to deal with the pressures preventing dinar growth,” said Eric.

1.1 percent stronger

The dinar strengthened significantly against the euro on Friday, registering a rise of 1.1 percent or RSD 1.27 and setting the official middle exchange rate at RSD 120.6893, the National Bank of Serbia (NBS) has stated.

On Thursday, the NBS intervened by purchasing EUR 30 million on the interbank foreign exchange (forex) market so as to ease the excessive rate volatility on a daily basis.

The Serbian dinar on Friday dropped against the common European currency by 0.1 percent when compared to the level a month ago, and 5.0 percent if compared to the one a year ago.

The indicative dinar-versus-dollar exchange rate has strengthened by 1.3 percent, so one dollar is traded for RSD 98.5138.

Against the U.S. dollar, the Serbian dinar is down 1.9 percent on the month, and 15 percent on the year.

Since the start of the year, the NBS has sold EUR 260 million, including today's intervention, and bought EUR 1.745 billion in total on the interbank forex market so as to ease the excessive rate volatility on a daily basis.