(Adds central bank governor quotes)
BELGRADE, Feb 22 (Reuters) - Growth in Serbia's economy is expected to pick up to 3.5 percent next year as exports and investments in infrastructure projects rise, the central bank said in a quarterly report.
The bank held its 2017 growth forecast at 3 percent.
Higher employment and increased wages in the private sector should also boost growth, the bank said.
It said it expected inflation to remain within its target range of between 1.5 and 4.5 percent this year, and that future monetary policy decisions would mainly depend on influences from abroad.
At a press conference following the presentation, central bank governor Jorgovanka Tabakovic said the percentage of bad loans had dropped to 17 percent of the total lending at the end of 2016 compared to 21.6 percent at the end of 2015.
"That is the lowest level since 2011," she said, adding that the bank will monitor carefully international and domestic markets when deciding on the future policy easing.
"We will use all instruments available to maintain low and stable inflation," she said.
Last week, the central bank kept its benchmark interest rate at 4 percent despite low inflation and a stable dinar currency, citing persistent global uncertainty. (Reporting by Ivana Sekularac; Editing by Tom Heneghan)