Serbian Inflation Rises to Highest in Europe on Food Cost

Serbia’s inflation rate surged to the highest level in Europe last month as food costs rose after a poor harvest in the Balkan nation.

The rate climbed to 12.9 percent from a year earlier, the highest since April 2011, following a 10.3 percent increase in September, the Serbian statistics office in Belgrade said on its website today. Consumer prices advanced 2.8 percent from a month earlier.

Serbia’s price surge is a “combination of earlier exchange-rate weakness, a poor harvest, tax increases and a rise in utility bills as part of the government’s fiscal consolidation,” Timothy Ash, an economist at Standard Chartered Plc in London, said in a note. Austerity efforts and “broader deflation as the economy shrinks before recovering next year should begin to slow inflation,” he said.

Serbia’s central bank unexpectedly raised its benchmark interest rate 0.2 percentage point last week to tame price growth, even as the economy fell into its second recession in three years. Gross domestic product has declined for three quarters, dropping 2.2 percent in the three months through September from a year earlier, according to preliminary data.

The Serbian dinar has lost 4 percent of against the euro this year, Europe’s worst-performing currency after the Romanian leu, according to data compiled by Bloomberg.

The Balkan nation today sold 38.5 million euros ($49 million) in 18-month Treasury bills at an average yield of 5.85 percent, the Serbian debt management agency said.

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