march 2014 monthly update - ujd.gov.rs update for investors... · march 2014 monthly update...

March 2014

Monthly Update

Politics On the Parliamentary elections held as of 16 March 2014, Serbian Progressive Party won 48.3% of total votes, followed by Socialistic

Party of Serbia 13.5%, Democratic Party 6.1% and New Democratic Party 5.7%. Serbian Progressive Party will have 158 seats in the

new Parliament composition of total 250, while Socialistic Party of Serbia will have 44 seats. According the conclusions of political

analysts, the current First Deputy Prime Minister and President of the Serbian Progressive Party Aleksandar Vucic will be Prime

minister of the new Government. Vucic has said that the new Government will be established till 1 May 2014 and called all parties

which passed into the National Assembly to start negotiations about forming the new ruling coalition.

On the municipal elections in the City of Belgrade, the Serbian Progressive Party won 43.6% of total votes, followed by Democratic

Party 15.7%, Socialistic Party of Serbia 11.5% and Democratic Party of Serbia 6.4%. The Serbian Progressive Party will have 63 seats

in the new City Parliament of 110 totals. Leaders of winning party have called representatives of other political parties to participate in

negotiations about the forming of the new ruling coalition in the City of Belgrade.

One of the most wanted drug lords, Darko Saric has been arrested as a result of long-lasting investigation and cooperation between

Serbian Security intelligence agency (BIA) and American Central Intelligence Agency (CIA). Saric who is transferred to custody in

Serbia has been accused for the drug smuggling from the Latin America into the Western Europe. Serbian Government has announced

that all cases of illegal cooperation between suspected political and police officials and Saric will be fully investigated

Fiscal Sector In February 2014, public debt of the Republic of Serbia increased from RSD 2,344.5bn (EUR 20.2bn) at the end of January 2014, to

RSD 2,364.9bn (EUR 20.4bn) at the end of February 2014. Central Government public debt to GDP ratio was at the level of 62.9% at

the end of February 2014. The major share of public debt is still in foreign currency out of which in EUR is 46.0%, USD 27.6%, RSD

20.3%, SDR 4.6%, CHF 0.9% and other 0.6% (GBP, JPY, DKK, SEC, NOK). Up to end of February 2014, Public Debt

Administration of the Republic of Serbia managed to meet its obligations which amounted to RSD 76.3bn (EUR 658.1mln), out of

which principal payments amounted to RSD 58.9bn (EUR 508.1mln), while interest and other costs were RSD 17.4bn (EUR 150.0bn).

Vast majority of items repaid up to date belong to Government Securities issued on domestic market RSD 61.4bn (EUR 529.6mln) out

of which principal payments were RSD 50.1bn (EUR 431.7mln) and interest payments were RSD 11.3bn (EUR 97.9mln). Obligations

in respect of foreign creditors were repaid in amount of RSD 6.7bn (EUR 57.5mln), out of which principal RSD 2.8bn (EUR

24.2mln). Payments in respect of guarantees issued by the Government were RSD 7.2bn (EUR 61.8mln) out of which principal RSD

5.3bn (EUR 45.3mln), while interest were RSD 1.9bn (EUR 16.5mln). In order to service all obligations PDA received RSD 76.8bn

(EUR 662.6mln) from domestic market out of which Government Securities issued in domestic currency amounted to RSD 63.4bn

(EUR 546.7mln) while receiving from EUR denominated Government Securities were RSD 13.4bn (EUR 115.8mln). Total receivings

at the end of February 2014, amounted to RSD 78.9bn.

At the auction of 3-year RSD denominated Government Bonds of the Republic of Serbia (annual coupon), issued on March 28th, 2014,

the volume of Government Bonds issued amounted to RSD 20,000,000,000. The total volume of offers amounted to RSD

23,056,150,000, i.e. 115.28% of the issued volume. Government Bonds in the amount of 1,802,448 were realized, having the total

nominal value of RSD 18,024,480,000. This presents 90.12% of the issued volume. Government Bonds were sold at YTM of 10.49%.

The maturity date of the said bonds will be 01 of April 2017. The coupon (10.00% annually) payment date is April 1st. The payments

are on annual basis until maturity date, which is April 1st 2017.

Announcement about changes in auction schedule of Government securities of the Republic of Serbia for April 2014 - The auction of

10 year EUR denominated Government Bonds is scheduled for April 9, 2014. Offering amount will be EUR 125.0mln.

EU to issue economic recommendations to Serbia in May in line with new enlargement approach, to cooperate with IFIs on boosting

countr’s economic growth, official says. The EU will issue economic recommendations to Serbia in May, in line with a new

enlargement approach, which focuses on economic preparation of candidate countries for membership in the bloc. It is too early to say

what the recommendations will be, but it can be assumed that they will refer to the labor market, due to the country’s high

unemployment rate, or to public companies burdening the state budget and competition. Focus is also on the fiscal situation in Serbia,

with the planned deficit at 7.1% of GDP and a growing public debt.

Economy Serbia will register all illegally built property in the real estate cadaster with the help of a USD 40 million loan from the World Bank,

according to the Minister Velimir Ilic. Minister recalled that there are some 1.3 illegally built pieces of real estate in Serbia. According

to the Minister, the EU has asked Serbia to carry out the registration before it can be included in its real estate cadaster.

The first Serbian business and brands fair SASPO 2014 opened on 28th March in Innsbrucka at Austria. There were some 50 stands at

the fair. Speaking at the exhibition, Slavka Draskovic, head of the government’s Office for the Diaspora, said that the two countries

have strong economic ties, adding that Austria is one of Serbia’s major foreign trade partners. She said that over 350 companies in

Vienna were founded by people of Serbian descent.

The World Bank will approve a USD 250 million budget support loan to Serbia if the state launches company restructuring by the

summer, World Bank country manager for Serbia Tony Verheijen has told.

Foreign Direct Investments Italy’s Aunde Group opens car seat covers factory in Jagodina in EUR 3 million investments. Italian vehicle seat manufacturer Aunde

Group has opened a car seat covers factory in Jagodina, called Aunde Srb, following an investment of some EUR 3 million. The plant

will employ more than 200 workers by the end of the year.

Skis Rossignol, a French manufacturer of alpine, snowboard, and Nordic equipment, as well as related outerwear and accessories, is

looking into the possibility of starting production in Smederevo, according to a statement from the local authorities following a

meeting with representatives of the company’s Italian unit and Smederevo Mayor Office.

March 2014

Source: Statistical Office of the Republic of Serbia; National Bank of Serbia; Bloomberg; Ministry of Finance and Economy

* Estimated value; **According to NBS methodology Foreign Debt consist of Public and Private sector debt; Ɨ General Government;

Macroeconomic Data Real GDP growth %

Industrial

production

Feb'14/ Feb'13 %

CPI Current acc.

Balance

Government bonds on international

market YTM as of February 28th

Currency

units/USD Currency units/EUR

2012 2013 2014*

Feb'14

/

Jan'14

Ann. %

Dec. last

12 months

mlnEUR

% of GDP

Serbia 2017

Serbia 2018

Serbia 2020

Serbia 2021

28 Feb 2014

28 Feb 2013

28 Feb 2014

28 Feb 2013

-1.7 2.5 1.0 1.1 0.1 2.6 -1,597.2 -5.0 3.923% 4.480% 4.877% 5.308% 84.6183 84.8448 115.9356 111.5200

* Estimated value

• CPI COICOP is defined as a measure of average change of retail prices of goods and services used for personal consumption. Prices

of these products and services in February 2014 in relation to January 2014 increased by 0.1%, on average. Consumer prices in

February 2014, compared with February 2013, increased by 2.6%, and in relation to December 2013, increase amounted to 1.5%.

Observed by main groups according to destination of consumption in February 2014 in relation to the previous month, the increase of

prices was noted in the following groups: recreation and culture (0.9%), alcoholic beverages and tobacco (0.5%), food and non-

alcoholic beverages and restaurants and hotels (by 0.3% each), health and transport (by 0.2% each), housing, water, electricity, gas and

other fuels and education (by 0.1% each). The decrease of prices was noted in the groups clothing and footwear (-1.8%),

communication (-0.4%) and furnishings, household equipment and routine household maintenance (-0.1%).

• The overall external trade in the Republic of Serbia for January - February 2014 amounted to:

- USD 5,200.8 million - which was a 9.2% increase compared to the same period 2013;

- EUR 3,812.2 million - which was a 6.9% increase compared to the same period 2013.

The value of exports amounted to USD 2,194.0 million, which was 18.2% increase when compared to the same period last year, while

the value of imports amounted to USD 3,006.8 million, which was 3.5% increase relative to the same period last year. Expressed in

Euros, the value of exports amounted to EUR 1,608.3 million, which was the increase of 15.7%, compared to the same period last year.

The value of imports amounted to EUR 2,203.9 million, which was 1.3% increase when compared to the same period last year. The

deficit amounted to USD 812.8 million, which was a decrease of 22.6% in relation to the same period last year. The deficit expressed in

Euros amounted to 595.6 million, which was a decrease of 24.2% compared to the same period last year. The export - import ratio

equaled 73.0% and was higher if compared to the same period last year when it was 63.9%. Expressed in Euros, the value of exports

amounted to EUR 875.3 million, which was an increase of 20.0%, compared to the same month last year. The value of imports amounted

to EUR 1,209.1 million, which was 7.1% increase when compared to the same month last year.

Source: Belgrade Stock Exchange

2.5%

2.2%

4.8%

20.1%

78.6%

Real GDP growth (%)

Inflation rate Ann. (%)

Ɨ Budget deficit (% GDP)

Unemployment rate Oct 2013

**Foreign Debt (% GDP)

2013

1.0%

2.6%

5.5%

20.1%

78.6%

*GDP growth for 2014 (%)

Inflation rate Ann. Feb (%)

*Ɨ Budget deficit (% GDP)

Unemployment rate Oct 2013

**Foreign Debt as of Jan 2014 (% GDP)

2014

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

% Belgrade OverNight Index Average

250.0

450.0

650.0

850.0

1,050.0

1,250.0Belgrade Stock Exchange Indices

Belex 15 index Belex line index

March 2014

Currency, Interest Rates and FDI

Key Policy Rates of National Bank of Serbia Current value Last change Date of last meeting Next board meeting

Key policy rate - 2w repo 9.50%

-0.50% 06.03.2014 17.04.2014 Deposit facility interest rate 7.00%

Lending facility interest rate 12.00%

Source: National bank of Serbia


• NBS FX reserves amounted to EUR 10,831.8 million at end-February, covering M1 by 351 percent or more than seven months of

imports of goods and services. The largest inflow to FX reserves came from bank allocations under foreign exchange reserve

requirements (EUR 54.5 million net), sale of RS securities in the domestic financial market (EUR 49.6 million) and disbursement of

loans and grants (EUR 31.4 million). Outflows from FX reserves were registered on account of settlement of liabilities to the IMF

(EUR 100.6 million) and foreign creditors (EUR 62.5 million). Net FX reserves, defined as FX reserves less banks’ required reserves

and drawings from the IMF, came at EUR 7,460.0 million. Trading volume in the IFEM reached EUR 411 million, down by EUR 157.3

million from the month before. In the first two months of the year, IFEM trading volume totalled EUR 979.3 million. The dinar

maintained its value against the euro in February, while the NBS intervened in the IFEM by selling EUR 280 million in order to ease

excessive daily volatility of the exchange rate.

• The industrial production in the Republic of Serbia in February 2014, when compared to February 2013, increased by 1.1% and in

relation to 2013 average, it decreased by 11.2%. Industrial production in the period January – February 2014, compared with the same

period 2013, increased by 1.2%.

Foreign Direct Investments in Serbia in period 2008 – December 2013


6789

101112131415

% National Bank of Serbia Interest Rates

Key policy rate - 2w repo Deposit facility interest rate

Lending facility interest rate

80

85

90

95

100

105

110

115

120

In RSD Exchange Rates

EUR/RSD USD/RSD

1,824 1,373 860 1,827 232

760

5.6%

4.7%

3.1%

5.0%

0.8%

2.3%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2008 2009 2010 2011 2012 December 2013

FDI (net), EUR million FDI (net), %GDP

March 2014

Public Debt Report

Public Debt Stock and Structure as of 28th

February 2014: In EUR mln In USD mln In RSD mln GDP %

Direct Liabilities (A)

Internal Debt 7,292 9,991 845,385 22.5%

External Debt 10,312 14,128 1,195,513 31.8%

Direct Liabilities in Total 17,604 24,119 2,040,898 54.3%

Indirect Liabilities (B)

Internal Debt 820 1,124 95,098 2.5%

External Debt 1,974 2,705 228,869 6.1%

Indirect Liabilities in Total 2,794 3,829 323,967 8.6%

Non-Guaranteed Local Government Debt (C)

Internal Debt 327 448 37,892 1.0%

External Debt 127 174 14,754 0.4%

Non-Guaranteed Local Government Debt in Total 454 622 52,646 1.4%

Central Government Public Debt (A+B) 20,398 27,947 2,364,865 62.9%

General Government Public Debt (A+B+C) 20,852 28,570 2,417,511 64.3%

Date Internal Public Debt External Public Debt Monthly Change of Public

Debt Direct Liabilities Indirect Liabilities Direct Liabilities Indirect Liabilities

31/03/13 172.4 -3.6 174.6 1.3 344.8

30/04/13 81.7 37.3 -452.8 24.9 -308.9

31/05/13 -134.8 -2.8 27.6 3.2 -106.8

30/06/13 -84.0 1.7 1.0 12.0 -69.3

31/07/13 2.4 4.2 170.7 -3.9 173.5

31/08/13 -2.5 30.2 43.9 1.6 73.2

30/09/13 21.2 13.0 -101.6 -8.7 -76.0

31/10/13 334.3 4.6 -70.3 -41.5 227.2

30/11/13 154.6 0.0 49.8 2.5 206.8

31/12/13 8.5 5.3 639.0 -19.1 633.6

31/01/14 33.9 -18.5 129.0 -6.1 138.2

28/02/14 203.4 -18.4 -62.0 -4.5 118.6

In EUR million

Source: Public Debt Administration

18,600

18,900

19,200

19,500

19,800

20,100

20,400

20,700

21,000

0

1,500

3,000

4,500

6,000

7,500

9,000

10,500

12,000

13,500

15,000

16,500

18,000

19,500

21,000

In m

illi

on

EU

R

In m

illi

on

EU

R

External debt - indirect liabilities External debt - direct liabilities

Internal debt - indirect liabilities Internal debt - direct liabilities

Central Government Public Debt (right axis)

DYNAMICS OF PUBLIC DEBT

March 2014

INTERNAL DEBT ANALYSIS EXTERNAL DEBT ANALYSIS




39.8%

37.5%

38.0%

38.5%

39.0%

39.5%

40.0%

40.5%

41.0%

Internal Public Debt/Total Public Debt Ratio

60.2%

57.0%

58.0%

59.0%

60.0%

61.0%

62.0%

63.0%

External Public Debt/Total Public Debt Ratio

7,292

820

700

720

740

760

780

800

820

840

860

6,000

6,200

6,400

6,600

6,800

7,000

7,200

7,400

In m

illi

on

EU

R

Internal Public Debt Dynamics

Direct liabilities Indirect liabilities

10,312

1,974

1,500

1,600

1,700

1,800

1,900

2,000

2,100

7,000

7,500

8,000

8,500

9,000

9,500

10,000

10,500

11,000

11,500

In m

illi

on

EU

R

External Public Debt Dynamics

Direct liabilities Indirect liabilities

51.1% 48.2%

0.7%

Internal Debt Currency Structure

RSD EUR USD

44.7%

45.3%

1.5%

7.6% 1.0%

Extrenal debt Currency Structure

EUR USD CHF SDR Other

March 2014

Government Securities DOMESTIC MARKET OVERVIEW


EUROBOND OVERVIEW

Spread to benchmark Spread to US Dollar Interest swap rate

Source: Bloomberg

7.50% 7.79%

8.58%

10.00% 10.38% 11.48%

12.99%

7.5%8.0%8.5%9.0%9.5%

10.0%10.5%11.0%11.5%12.0%12.5%13.0%13.5%

3M 6M 53W 2Y 3Y 5Y 7Y

Last Primary Auctions Accepted Rates

7.71%

8.76%

9.53%

10.59%

13.13% 12.99%

12.49%

7.5%8.0%8.5%9.0%9.5%

10.0%10.5%11.0%11.5%12.0%12.5%13.0%13.5%14.0%

3M 6M 53W 2Y 3Y 5Y 7Y

Average Accepted Rates at Primary Auctions

4.304.604.905.205.505.806.106.406.707.007.307.607.90

96 $98 $

100 $102 $104 $106 $108 $110 $112 $114 $116 $118 $120 $

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Price/YTM Graph - Serbia Eurobond 2021

Closing price YTM

250 bps

280 bps

310 bps

340 bps

370 bps

400 bps

430 bps

460 bps

490 bps

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

In p

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YTM US Dollar Interest Rate Swap - 7Y

Republic of Serbia Eurobond 2021 - Tap

Issuer: Ministry of Finance of the Republic of Serbia

Ratings: BB- (S&P); BB- (Fitch)

Maturity: 28.09.2021

Coupon: 7.25% semi-annual

*Size: USD 2.0bn

**Re-offer yield: 6.625%

Re-offer price: 104.179

Spread to US Treasury Benchmark: 497.0 bps

Announcement date: 27.09.2012

Listing: London Stock Exchange

*Primary auction USD 1,0bn 21.09.2011.; Tap Issuance 27.09.2012.

USD 1,0bn. **Tap Issuance re-offer yield.

Republic of Serbia Eurobond 2021 - Price/Yield

Date Closing Price YTM Monthly price

change %

Monthly yield

change %

28/02/14 111.97 5.308 6.1% -16.1%

31/01/14 105.51 6.328 -0.3% 0.7%

31/12/13 105.82 6.285 0.8% -2.3%

30/11/13 104.95 6.433 0.3% -1.0%

31/10/13 104.59 6.497 0.1% -0.4%

30/09/13 104.48 6.521 3.8% -8.6%

31/08/13 100.68 7.136 -1.9% 4.6%

31/07/13 102.62 6.823 -0.3% 0.8%

30/06/13 102.97 6.771 -7.5% 22.3%

31/05/13 111.29 5.535 -5.2% 17.2%

30/04/13 117.36 4.723 5.5% -15.2%

31/03/13 111.22 5.572 -0.6% 1.4%

March 2014

Republic of Serbia Eurobond 2017





Size: USD 750.0mln

Re-offer yield: 5.450%






Source: Bloomberg

3.50

3.80

4.10

4.40

4.70

5.00

5.30

5.60

5.90

6.20

6.50

95.0 $

96.0 $

97.0 $

98.0 $

99.0 $

100.0 $

101.0 $

102.0 $

103.0 $

104.0 $

105.0 $

106.0 $

107.0 $

108.0 $

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Closing price YTM

270 bps

290 bps

310 bps

330 bps

350 bps

370 bps

390 bps

410 bps

430 bps

450 bps

470 bps

490 bps

510 bps

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

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change %

Monthly yield

change %

28/02/14 104.54 3.923 3.0% -18.4%

31/01/14 101.51 4.808 0.7% -4.0%

31/12/13 100.84 5.008 0.7% -3.8%

30/11/13 100.15 5.208 0.0% -0.2%

31/10/13 100.12 5.217 0.0% 0.2%

30/09/13 100.16 5.205 2.1% -9.5%

31/08/13 98.13 5.753 -0.2% 1.0%

31/07/13 98.32 5.695 -0.1% 0.7%

30/06/13 98.44 5.655 -4.0% 22.7%

31/05/13 102.56 4.609 -2.9% 18.9%

30/04/13 105.67 3.877 2.4% -13.3%

31/03/13 103.22 4.472 0.3% -1.8%

March 2014






Size: USD 1.5bn








change %

Monthly yield

change %

28/02/14 99.99 4.877 4.8% -15.6%

31/01/14 95.42 5.781 0.3% -0.7%

31/12/13 95.17 5.821 1.3% -3.8%

30/11/13 93.98 6.048 -0.7% 2.5%

31/10/13 94.66 5.899 1.1% -3.2%

30/09/13 93.63 6.091 3.3% -8.8%

31/08/13 90.64 6.679 -1.7% 5.3%

31/07/13 92.22 6.344 -0.4% 1.5%

30/06/13 92.61 6.250 -6.3% 22.9%

31/05/13 98.81 5.086 -4.2% 17.3%

30/04/13 103.15 4.335 4.2% -14.3%

31/03/13 98.95 5.056 0.9% -2.8%


Source: Bloomberg

4.00

4.50

5.00

5.50

6.00

6.50

7.00

7.50

89.0 $

91.0 $

93.0 $

95.0 $

97.0 $

99.0 $

101.0 $

103.0 $

105.0 $

107.0 $

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Closing price YTM

270 bps

300 bps

330 bps

360 bps

390 bps

420 bps

450 bps

480 bps

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

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March 2014


Date Closing Price YTM Monthly price change %

Monthly yield change %

28/02/14 105.89 4.480 3.7% -16.4%

31/01/14 102.16 5.360 0.4% -1.9%

31/12/13 101.74 5.465 0.6% -2.6%

Spread to Benchmark Spread to US Dollar Swap Interest rate

0.00

1.00

2.00

3.00

4.00

5.00

6.00

98.0 $

99.0 $

100.0 $

101.0 $

102.0 $

103.0 $

104.0 $

105.0 $

106.0 $

107.0 $

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Closing price YTM

270 bps

290 bps

310 bps

330 bps

350 bps

370 bps

390 bps

410 bps

430 bps

450 bps

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

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Ratings: BB- (S&P); BB- (Fitch); B1(Moody’s)


Coupon: 5.875 % semi-annual

Size: USD 1.0bn






March 2014

Amortizing bond - London Club 2024

Auction Date Maturity Date Par Value Market value Coupon %

01/10/2004 01/11/2024 1,080,000,000 972,000,190 6.75%

Price/Yield

Date Closing Price YTM Monthly price change % Monthly yield change %

28/02/14 101.21 6.589 1.3% -2.6%

31/01/14 99.88 6.765 1.1% -2.0%

31/12/13 98.83 6.904 0.2% -0.3%

30/11/13 98.67 6.925 0.4% -0.7%

31/10/13 98.29 6.975 0.5% -0.9%

30/09/13 97.80 7.038 1.2% -2.1%

31/08/13 96.65 7.191 -1.4% 2.6%

31/07/13 97.98 7.011 -1.5% 2.9%

30/06/13 99.49 6.814 -1.8% 3.4%

31/05/13 101.27 6.589 -0.5% 0.9%

30/04/13 101.78 6.528 1.3% -2.5%

31/03/13 100.43 6.696 -0.1% 0.2%

AMORTIZING BOND – LONDON CLUB 2024 OVERVIEW


Source: Bloomberg

6.30

6.40

6.50

6.60

6.70

6.80

6.90

7.00

7.10

7.20

7.30

7.40

7.50

7.60

7.70

7.80

7.90

8.00

94.0 $

95.0 $

96.0 $

97.0 $

98.0 $

99.0 $

100.0 $

101.0 $

102.0 $

103.0 $

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Price/YTM Graph Amortizing Bond - Serbia London Club 2024

Closing price YTM

425 bps

450 bps

475 bps

500 bps

525 bps

550 bps

575 bps

600 bps

625 bps

650 bps

675 bps

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

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march 2014 monthly update - ujd.gov.rs update for investors... · march 2014 monthly update...

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