National Bank of Serbia (NBS) Governor Dejan Soskic stated Monday that the inflation in Serbia will reach its maximum in the second quarter of 2011, after which it is expected to gradually fall and move towards the inflation target by the end of the year.

At a news conference, Soskic pointed out that the main factors of inflation in the first half of 2011 will be the rise in food prices, the global oil price movements and the rise in state-controlled prices.

"High interannual inflation rates in this period are influenced by the low base rate in the first months of 2010," he said.

Soskic stressed that the inflation is expected to drop in the second half of 2011 and the beginning of 2012, as a consequence of a relative decline in food prices and low aggregate demand.

In addition, the restrictive monetary policy pursued so far is expected to have the greatest disinflationary effects in the second half of 2011.

Public sector should rationalize operation

National Bank of Serbia (NBS) Governor Dejan Soskic said Monday the 2010 budget revenue was RSD 2.4 billion (EUR 1 = RSD 102) based on NBS profit, and that the revenue in 2011 is expected to reach 4.2 billion.

The public sector has to rationalize its operation to raise the level of responsibility regarding the tax payers' money, which is one of the requirements to speed up the economic development, Soskic told a news conference.

According to him, the NBS has formed a financial system improvement centre and tasked it with improving the financial market, removing obsolete procedures, organizing the financial system and introducing and improving the existing financial instruments.

The centre is meant to help turn Serbia into a country with "smart" regulations and the most attractive investment destination in the region, Soskic noted. He called on others within the public sector to continue their efforts and help create better economic conditions in Serbia.