Bringing the inflation rate down at the target level is currently the most important task of the National Bank of Serbia (NBS), but this does not rule out dealing with macroeconomic challenges both in the medium and in the long run, Governor of the National Bank of Serbia (NBS) Dejan Soskic has said in an interview for CorD, a Serbian magazine in English.

Asked to comment on the consequences of price rises, Soskic said that in the previous year, the government had increased the prices that were within its jurisdiction more than what had been agreed on, adding that the movement of regulated prices and volatile food prices had contributed most to exceeding the 2010 inflation target limit.

The government nevertheless continues implementing the policy of limiting inflation to seven plus or minus two percent, but in the first four months it already increased the regulated prices by 8.8 percent and thus practically used up the total allowable increase for this year, said the NBS governor.

Warning that any further increase in the regulated prices could intensify the inflationary pressures and result in a tightening of the monetary policy, Soskic pointed out that such a tightening, however, would limit the development potential of Serbia's economy, as well as threaten the growth of gross domestic product (GDP) and reduce employment.

Soskic also pointed out that the key aspect of stabilization in the medium and longer term was the reduction of current expenditure as a share of GDP and encouraging investment and exports. There is an urgent need to intensify the involvement of state institutions, since the change of economic structure and focusing on industrial development and exports are vital for stabilizing and strengthening the domestic currency, Soskic stressed.

A growth in direct foreign investment is very important for the process, the NBS governor said.