Investors hold back, dinar keeps slumping
10. May 2012. | 07:33 07:34
Source: Tanjug
The dinar's drop against the euro since the start of the year is the result of a chronic lack of foreign currency in the ordinarily "shallow" market, which is augmented by investors holding back because of uncertainty in Serbia and the eurozone, economists told Tanjug on Wednesday.
The dinar's drop against the euro since the start of the year is the result of a chronic lack of foreign currency in the ordinarily "shallow" market, which is augmented by investors holding back because of uncertainty in Serbia and the eurozone, economists told Tanjug on Wednesday.
Professor of the Belgrade Faculty of Economy Djordje Djukic said the dinar's drop was caused by past problems, meaning the fact that Serbia spent more that it produced, but also because of current problems in the neighbourhood and the eurozone, which is in recession, apart from Germany.
Investors fear, not so much the situation in Serbia, but the outcome of the eurozone crisis, particularly in Greece, as well as "the fact that keeps becoming clearer, that the healthy core of the eurozone is going to separate," he noted.
"That indicates that investors will be too cautious about the markets like Serbia, so I do not expect a large inlux of direct foreign investments, and the supply of foreign currency will automatically drop," he stated.
With the low economic growth rate, which will probably be close to zero this year, everything says the pressure weakening the dinar is getting stronger," Djukic added.
"Only resolute steps by the new government, in line with what the IMF is probably going to insist on, and it is my belief they will now be much stricter, in view of the deteriorated economic situation, particularly in the south of Europe, will be the main signal to which the foreign exchange market will react, either by weakening the dinar further of stopping at this level," Djukic explained.
Professor of the Belgrade Banking Academy Zoran Grubisic said the dinar would continue to drop against the euro in the long run, with occasional fluctuations.
According to Grubisic, EUR 3.3 billion of Serbia's foreign debt will mature this year, and more than EUR 3 billion in each of the next two years.
He expects the central bank to continue its occasional and mild interventions on the foreign exchange market to sustain activity and liquidity on the market.
That market has been pretty "shallow" in the past month, probably because of uncertainty regarding the elections and arrangement with the IMF, meaning the new government and budget review, he said adding that those were all unknowns that caused investors to hold back.
The new government should reach an agreement with the IMF as soon as possible to continue the precautionary arrangement with that institution, which would be a good signal to the market, Grubisic stated.
Comments (0)
Enter text: