REPUBLIC OF SERBIA Ministry of Finance I NVESTOR P RESENTATION M AY 2015
1. Republic of Serbia – Overview 2. Macroeconomic Background 3. Banking Sector 4. Fiscal Policy and Debt Management Strategy
Serbia at a Glance Resilient economy on the path to full integration with Europe Key Facts EU Non-EU Form of Government: Parliamentary Republic Vilnius Territory: 88,361 sq. km Novi Sad Capital: Belgrade 7.1 million (1,2) Population: Belgrade Kragujevac EUR 4,675 (1,2) GDP per capita: EUR 33.2bn (1,2) Nominal GDP: SERBIA Nis Credit ratings: BB-/B+/B1 Currency: Serbian Dinar (RSD) EUR/RSD = 120.6102 (3) Current exchange rate: USD/RSD = 110.0057 (3) 1 National Statistics Office as of 2014 (preliminary), 2 Excluding Kosovo and Metohija, 3 NBS as of 1 June 2015 Recent Milestones and Progress to EU accession Responses to EC agrees to start the European Serbia’s EU accession Formation of new Formation of new Commission’s negotiations in January Government Government Questionnaire 2014 April 2014 2011 Mar 2012 July 2012 Jan 2014 Nov 2014 2009 Sept 2013 2006 2008 2009 2011 Dec 2013 Serbia reached EU membership Government EU candidate Serbia started EU IMF agreement application restructuring status awarded accession negotiations 3
Serbia’s Rating In Comparative Perspective March-15 Dec-14 Change March -15 Dec -14 Change March-15 Serbia BB- BB- No Change B+ B+ No Change B1 Bulgaria BB+ BB+ no change BBB- BBB- no change Baa2 Croatia BB BB no change BB BB no change Ba1 Ba1 Hungary BB+ BB BB+ BB+ no change Romania BBB- BBB- no change BBB- BBB- no change Baa3 no change Latvia A- A- A- A- no change A3 no change Baa1 Lithuania A- A- A- A- no change Credit Rating History Standard and Poor's – In January 2015, the S&P affirmed ratings at BB- with negative outlook. The main drivers of were the beginning of fiscal consolidation programme and the new IMF agreement. Fitch Ratings – In January 2015, the Fitch affirmed Serbia’s B+, with stable outlook.The main risk factors that, individually or collectively, could trigger positive rating action are: - Successful implementation of a credible medium term fiscal consolidation programme that effectively reduces public debt/GDP; - An acceleration of economic recovery and narrowing of external imbalances. Moody's – In July 2013, Moody ’s Investor Service assigned B1 rating to the Republic of Serbia, with a stable outlook. The main drivers of Serbia's B1 ratings are: the government’s fiscal deficits and debt levels, the economy’s subdued near -term growth prospects and wide current account deficits and the institutional benefits of Serbia’s future EU accession process. 4
1. Republic of Serbia – Overview 2. Macroeconomic Background 3. Banking Sector 4. Fiscal Policy and Debt Management Strategy
Exports Have Been A Major Driver Of Economic Growth Real GDP Growth (Y-o-Y) • In 2013 the Republic of Serbia marked one of the highest real GDP 35 4% growth rates (2.6%) in the CEE region 34 2.6% 3% • The growth in 2014 is -1.8%, which was was mainly driven by the 33 2% impact of the floods on coal and electricity production in May-December 1.4% 32 2014 1% 34.3 31 • 0% During January-April 2015 exports of goods increased by 4.2% in value 0.6% 31.7 30 33.2 terms over the corresponding 2014 period, while imports of goods -1% 29 33.4 -1.0% increased by 6.2% (in EUR terms) -2% 29.8 28 -1.8% • 27 -3% Exports of motor vehicles kept the leading 17.4% share followed by 2010 2011 2012 2013 2014 processed food products with 10.7% share, basic metals 8.9% share, and rubber and plastic products 7.2% share in total exports (in EUR GDP, EUR bn GDP growth rate terms ) • In April 2015 the export-import ratio was on the level of 72% Source: National Statistics Office, Ministry of Finance Exports of Goods – Nominal Growth (Y-o-Y) Real GDP Growth 2011 – Q1 2015 (Y-o-Y) 30% 4.0% 26.0% 3.0% 25% 2.0% 1.0% 20% 0.0% 13.9% 15% -1.0% -2.0% 10% -3.0% 3.8% 4.2% 5% 1.4% 0% 2011 2012 2013 2014 Apr-15 Serbia Romania Bulgaria Croatia Hungary Source: National Statistics Office, Bloomberg Source: National Bank of Serbia 6
External Position Foreign Exchange Reserves • 13.0 At the end of April 2015 Serbia had a comfortable level of FX reserves 12.1 at EUR 10.5bn (7 months of imports coverage) and net reserves at 12.0 11.2 10.9 EUR 8.4bn which provide a good cushion for the Serbian external 10.5 11.0 9.9 position 10.0 • 9.0 At the end of February 2015 external debt stood at EUR 26.5bn, 8.0 including private sector external debt of EUR 11.7bn 7.0 • During the period April 2014 - April 2015 RSD/EUR exchange rate 6.0 showed limited volatility. In November 2014 depreciation pressures 5.0 brought RSD/EUR rate above 120.0 (and triggered managing role of 2011 2012 2013 2014 Apr-15 the NBS). Strengthening of USD brought USD/RSD to the level of 112.0 in February 2015. Source: National Bank of Serbia Exchange rate EUR/RSD (April 2014 – April 2015) Exchange Rate USD/RSD (April 2014 – April 2015) 125.0 123.0 112.0 121.0 108.0 119.0 104.0 117.0 100.0 115.0 96.0 113.0 92.0 111.0 88.0 109.0 84.0 107.0 105.0 80.0 Source: National Bank of Serbia Source: National Bank of Serbia 7
Trade Balance Balance of Payments (% of GDP) • 15.0% Current account deficit in 2014 reached historical minimum level of Net FDI Financial Account ex.FDI Current Account 5.9% of GDP, while estimated CAD for 2015 is 4.3 % of GDP 10.0% 2.1% • The significant growth rates in 2014 are recorded in export of tobacco 6.6% 5.0% 8.7% 3.6% products (+84%), paper products (+22%), oil derivatives (+14%), 3.9% 2.6% 2.2% agricultural production (+14%), processed food (+5%) and clothing 1.4% 0.0% (+4%), meanwhile in the period Jan-March 2015 significant growth -6.1% -5.9% -5.0% -9.9% rates were recorded in exports of agricultural products (+30%) and -11.5% basic metals (+20%) comparing to the same period last year -10.0% • The export - import ratio was stable over the past 12 months at the -15.0% level of 72% 2011 2012 2013 2014 • Recovery of euro zone will be very important for further acceleration Source: National Statistics Office, National Bank of Serbia of Serbian exports 0.231884 0.231884 Trade Deficit (% of GDP) External Liquidity Indicators (% of GDP) CA Deficit Debt Repayments FX Reserves 6.0 16.7% 19.0% 40.0% 36.1% 17.0% 13.2% 34.5% 5.0 15.4% 32.7% 35.0% 31.1% 15.0% 4.0 13.0% 30.0% 5.2 13.0% 25.0% 3.0 4.4 5.3 20.0% 11.0% 13.8% 13.0% 11.5% 2.0 15.0% 10.4% 11.6% 9.0% 9.9% 10.0% 6.1% 5.9% 1.0 7.0% 3.6 5.0% 0.0 5.0% 0.0% 2011 2012 2013 2014 2011 2012 2013 2014 Trade deficit (EUR bn) Trade deficit (% of GDP) Source: National Statistics Office Source: National Statistics Office, National Bank of Serbia 8
Serbia’s Exports and Imports in the period January- April 2015 Export of Goods Import of Goods 10% 19% 16% EU EU 7% CIS CIS MEDA MEDA 6% 12% 62% Other Other 68% Source: National Statistics Office Source: National Statistics Office Import of Goods Export of Goods Italy Italy Germany 11% Germany 19% Bosnia and Herzegovina Russian Federation 12% 45% 49% Russian Federation China 12% 11% Montenegro Hungary 8% 8% 7% Romania Poland 5% 7% 4% 4% Others Others Source: National Statistics Office Source: National Statistics Office 9
…And By Types Of Products External Trade as % GDP Export Import • Serbia’s exports are reasonably diversified, covering the full range of 46.8% products from intermediate inputs, to consumer and capital goods 50% 46.5% 45.1% 41.7% 45% • This confirms that Serbia is already being integrated into the 40% 33.6% European trade system and is able to export goods to multinational 32.1% 35% 27.6% 30% companies operating in the global supply chain 24.8% 25% • Intermediate and capital goods have been the fastest growing export 20% product categories in period 2011-2013, one of the positive results of 15% 10% the direct foreign investment that Serbia has attracted in recent 5% years, while durable and non durable consumer goods recorded 0% positive growth rates in 2014 12.0% and 8.5% respectively 2010 2012 2013 2014 Source: National Statistics Office Import Jan – Apr 2015 (CIF) Export Jan – Apr 2015 (FOB) Energy Energy 2% 10% 13% Intermediate goods 18% Intermediate goods 33% Capital goods Capital goods 23% 14% Durable consumer goods Durable consumer goods 31% 2% 5% Non durable consumer goods Non durable consumer goods 22% 27% Unclassified by MIG Unclassified by MIG destination destination Source: National Statistics Office Source: National Statistics Office 10
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