Serbian Prime Minister Mirko Cvetkovic assessed on Friday that exports could come into jeopardy if the exchange rate continues to strengthen.

Low exchange rate stimulates exports less which could endanger exports if the exchange rate appreciation persists, he said and added that Serbia's export was on a very high level in 2010 and early 2011.

On the other hand, although the high exchange rate has a negative effect on exports, it also has a positive effect on citizens and economy holding euro-indexed credits, Cvetkovic told reporters following the signing of the social and economic agreement with trade unions for 2011. He noted that it is good that Serbia is not experiencing tendencies of constant rise or drop in the exchange rate, which indicates that the exchange rate is being established on the basis of offer and demand.

Cvetkovic assessed that the strengthening of the dinar is a consequence of a greater inflow of foreign currency on the local market than the country needs.

“It seems that at this point we have a bigger offer of foreign currency than is needed. When the country's and the economy's foreign payments mature, the outflow of foreign currency will probably increase,” Cvetkovic told reporters in the Serbian government.

He reminded that the National Bank of Serbia (NBS) believes the exchange rate needs to be fluctuating and based on offer and demand, while the NBS should intervene only in case of major daily oscillations. He pointed out that the Serbian government supports such a policy of the central bank.

The NBS stated earlier that the local currency would strengthen on Friday by 52 paras and thus cross the psychological border of RSD 100, as the official middle exchange rate would total RSD 99.6292.