January 2006 EVALUATIONS OF THE BASIC ECONOMIC FLOWS

The business environment in Serbian economy at the end of November 2005 was evaluated slightly unsatisfactory than a month ago.

Positive flows were registered in: growth of industrial production, export, mild increase of foreign demand, total foreign currency reserves and average earnings.

Industrial production entered the positive zone of growth in the last quarter of 2005, which was pointed out by IZIT in its report from the beginning of the second quarter. Namely, extremely worsen economic non-liquidity in the first quarter caused by involved PDV, but also by very sharp credit-monetary policy of NBC, resulted in absence of capital in flow and this had negative repercussions at the dynamics of industrial production. However, after the first quarter when the first non-liquidity shock was partly amortized, began the trend of softening of negative movements of industrial production so that in the last quarter positive growth rate was recorded.

From the very beginning of 2005 export registers positive trend. This is the result of more realistic invoices emphasize, and smaller part goes on revival of economic activities.

Total foreign currency had in continuity positive dynamics. This is the result of strengthening of foreign currency reserves of NBS through money changer’s jobs. The average net earnings registered even, with certain oscillations, growth of purchase power. But it must be emphasized that their level is still further on insufficient for covering expenses of the standard consumer basket. When talking about demand dynamics from the foreign market, then their positive movement in November must be taken with reserve since higher oscillations are present with this economic indicator.

Negative flows were registered with the following economic indicators : agriculture production, domestic market demands, deposited money, liquid assets of business banks, inflation, too high fiscal burdening, too expensive credits and monopolistic behavior.

Long term negative influence at the Serbian economy has inflator pressures, too high tax burdening, expensive credits and monopolistic behavior. So these negative phenomena were not only the characteristic of only November economic flows but also of a longer period of time. Talking about negative movements only in the reported month, then drastic drop of free assets of business banks and slight reduction of deposited money should be pointed out.

Significant reduction of liquid assets of business banks is the result of implementation of additional restrictive measures of credit-monetary policy of NBS. Slight drop of deposited money is more an exception for this month since the trend of enforcement of transaction to the detriment of cash money already exists from the end of the last year.