March 11, 2020 / 5:01 PM / 21 days ago

REFILE-UPDATE 1-Serbia cuts main interest rate amid coronavirus fears

(Refiling to add RICs RSCBIR=ECI and RSCPIY=ECI, no changes to text)

By Aleksandar Vasovic

BELGRADE, March 11 (Reuters) - The Serbian central bank cut its benchmark interest rate by 50 basis points to 1.75% from 2.25% on Wednesday, a day ahead of a scheduled meeting, to help minimise economic disruption caused by the coronavirus outbreak.

Four out of 11 analysts and traders polled this week and last had forecast a 25 basis point cut, while the remainder predicted the bank would hold rates.

“By cutting the rate, the bank additionally supports lending and growth,” governor Jorgovanka Tabakovic told a news conference.

“The bank is reacting in a timely manner and adequately to increased uncertainties from abroad caused by the outbreak of coronavirus.”

The bank said it was ready to use available instruments in the future to reduce the impact of global developments on Serbia’s economy.

Serbia’s inflation rate accelerated to 2% in January, still within the target band of 3%, plus or minus 1.5 percentage points, up from 1.9% a month earlier.

The dinar’s exchange rate against the euro remained stable. Appreciation pressures on the domestic currency have eased in February and early March.

Tabakovic said the slowdown of global economic growth, including in Serbia’s main trade partners in the European Union, could impact domestic growth.

According to estimates by the government, the International Monetary Fund and the central bank, Serbia’s economic growth is seen at 4.2% in 2019 and around 4% in 2020.

Last month President Aleksandar Vucic said Serbia’s economic expansion could slow this year due to coronavirus.

So far, 12 people in Serbia, including a Chinese national, have tested positive for the coronavirus.

Serbian authorities this week barred all indoor public gatherings of more than 100 people, shut some small border crossings and stepped up health controls at others to stem the spread of coronavirus. Serbia also banned entry for nationals of Italy, South Korea, Iran, Switzerland and some Chinese provinces.

On the back of fiscal revenues, Serbia’s budget recorded a small surplus in 2019 and is expected to show a shortfall of around 0.3% of GDP this year.

The central bank left interest rates unchanged last month. (Reporting by Aleksandar Vasovic, writing by Daria Sito-Sucic; Editing by Toby Chopra and Gareth Jones)

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