Weekly Report 12 - 18 July 2016

3-month state of emergency declared following a failed military coup

CBRT cuts its overnight lending rate further, by 25 bps to 8.75%

External rebalancing continues in 5M:16 with the 12-month rolling deficit at 3.8% of GDP, mainly on the back of a favourable energy bill

Current account deficit rises to 2.7% of GDP on a 12-month rolling basis in May, from 1.1% at end-2015, mainly due to higher income outflows (albeit subsequently reinvested)

A better trade performance and lower income outflows push up the current account surplus to 2.4% of GDP on a 12-month rolling basis in May from 1.4% at end-2015

Fiscal performance improves slightly in 5M:16, with the 12-month rolling budget deficit narrowing to 3.7% of GDP in May from 3.8% of GDP at end-2015

NBS proceeds with a further rate cut of 25 bps

Serbia opens two more Chapters in EU accession negotiations

Tourist arrivals rise by 10.4% y-o-y to an all-time high of 172.2k in 5M:16

Tourist receipts reach EUR 60.4mn (0.6% of GDP) in 4M:16

Headline deflation remains stable, for a second successive month, at -0.7% y-o-y in June

Parliament unanimously passed the judiciary reform legislation, increasing the country’s chances to open EU accession talks

Economic growth strengthens to 3.0% y-o-y in Q1:16 from 2.8% in FY:15, on the back of a sharp increase in the services sector

Tourist arrivals rise sharply in November-June, mainly due to heightening security concerns in neighbouring competitors -- Turkey and Egypt

Headline inflation rises sharply by 1.7 pps to a 7½-year high of 14.0% y-o-y between May and June, mainly due to higher prices of fruit and vegetables

CBE to proceed with measured hikes of its policy rates in H2:16, in an effort to contain inflation