National Bank of Serbia (NBS) Governor Dejan Soskic said Wednesday that the inflation rate in Serbia will stay high in the next few months.

At a news conference, Soskic specified that year-to-year inflation should continue to grow in the first quarter, stay high in the second, and significantly drop in the second half of the year.

The governor pointed out that the greatest challenge this year will be the unpredictable growth in food and energy prices, as well as keeping the state-regulated prices under control.

Soskic reminded that year-end inflation in 2010 was 10.3 percent, with a base inflation of 8.8 percent, a 17.4 percent surge in agricultural product prices and 12 percent in government controlled prices.

He also noted that inflation totaled 0.3 percent in December, as a consequence of a sizeable drop in agricultural product prices, a slower rise in the prices of medicine and non-food products, as well as postponing some price hikes.

Soskic pointed out that the central bank's main goal is preserving price stability, but so that its anti-inflation restrictive measures do not curb the country's economic growth.

Economic growth in 2011 to reach around 3 percent

Serbia is expected to achieve around three percent of GDP growth in 2011 on the basis of local demand recovery, primarily in the area of investments, Governor of the National Bank of Serbia (NBS) Dejan Soskic also stated on Wednesday.

During a news conference, Soskic pointed out that net exports are expected to make up a smaller but still positive part in the growth of the country's economic activity.

He underscored that economic recovery has not yet made its full effect on the labour market developments, noting that economic recovery cannot be stable and sustainable without an increase in the employment rate.

In December, Serbia's public debt reached EUR 12.1 billion, which represents 40.7 percent of the country's GDP, but it is expected to stabilise in 2011 since fiscal rules impose certain limits, Soskic said.

According to early estimates, direct foreign investments in 2010 totalled approximately EUR 860 million, which is less than the originally planned EUR 1 billion, the NBS governor noted.