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Economic Conditions

Regional Competitiveness Initiative: 4 th Annual Regional Conference on Competitiveness and Economic Growth Access to Finance Serbia. Economic Conditions. -Foreign Trade in January and February alone plummets 35%

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Economic Conditions

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  1. Regional Competitiveness Initiative: 4th Annual Regional Conference on Competitiveness and Economic GrowthAccess to FinanceSerbia

  2. Economic Conditions -Foreign Trade in January and February alone plummets 35% -Industrial Production down more than 20% with some sectors declining more than 40% -Unemployment, already high at 14-16%, expected to climb to more than 20% -GDP expected to fall 5-6% in 2009 -Currency losing ground though more recently signs of stability

  3. A Few Impediments to Access -No non-bank financial regulation in place -Substantial deposit outflows in 4th quarter 2008 and 1st quarter 2009 -Almost 60,000 companies presently have their accounts frozen. -Banks account for as much as 95% of financial intermediation in Serbia -High percentage of loans in Serbia indexed to FX leading to FX induced credit risk as currency fell.

  4. And a few more….. -Loan growth stalled and loan quality deteriorating -Banks still using the “cherry picking” strategy -Serbia well banked but risk management options remain rudimentary - Government programs for improving access helpful but still mired in bureaucracy

  5. Government Efforts to Stimulate Credit Completed/Underway • Increase of guaranties for savings • Arrangement with the IMF • Decrease of Current Public Expenditure/Wages • Loosening Monetary Policy • Targeted Fiscal Expansion Some Other Options • Further easing of monetary policy • Repayment of Government debt to suppliers to increase liquidity • Increase of Public Infrastructural Investments

  6. Government Stimulus Efforts Summary of the Financial Stimulus Package in Numbers (Billions of Dinars) (exchange rate 94 dinars/Euro June 11, 2009) Loans with government support: • Subsidized liquidity loans 40.0 • Investment loans with the participation of the fund 17.0 • Subsidized consumer loans 20.0 • Foreign credit lines 45.0 Support to the economy through Development Fund & Agencies: • Start up loans 3.10 • Development of companies in underdeveloped regions 2.49 • Promoting tourism 0.32 • Regular operations of Development Fund 6.20 • Exports through AOFI (Export Ins. & Financing Agency) 4.32 • Finance for factoring (through AOFI and SMEK) 1.73 • Insurance & guarantees (AOFI, SMEK, GF) 4.31 • Incentives to attract FDI 1.70 • National Employment Agency Programs 3.00 TOTAL 149.17

  7. Project Initiatives Supporting Access • Inventoried Grant Programs, Debt Capital Products, Government Programs and Private Equity firms in the country • Source/referrals of potential companies for PE firms with specific sector interest • Work with a few banks in targeted sectors where they have interests to expand their risk exposure (i.e. energy efficiency) • Limited firm level support to identify sources of working capital

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