11.08.2011 Novi magazin 15

The sufferings of the tiny saver

The sufferings of the tiny saver
Jelena Aleksic investigated is it, and why, more cost-effective to save in dinars or in Euros.

At the beginning of the month there was an interesting calculation on the website of the National bank of Serbia.


Is it Interesting, disputable, recommendable?

We have graphically showed the calculation in detail – and hopefully very clearly – but in short it says: If you had saved up from November last year till august this year in dinars, on the 10 thousand that you deposited you would have gotten 108.645 dinars, for which on August 1st you could have bought 1059 Euros.

But if you turned those hundred thousand dinars into Euros, you would have gotten 931 Euros and after nine months, on August 1st, you would have retrieved 970 Euros from the bank. On the same day for the same amount of money you could have bough – less than 100.000 dinars, or exactly 99.551 dinars.

Confused? Understandable, even though the calculation is correct. Still, there are a couple of imperfections. The period for which the calculation was made was “carefully” chosen. Firstly, it is a month that the “Week of savings” is in, so the interests are higher than usual.

The average interest on dinars was 11,7 percent a year, and 6,25 on Euros. Secondly, and more importantly, in November last year the euro was worth 107 dinars, and 102 dinars on August 1st, and that is the reason why you could get a lot more Euros for the same amount of money than you could a couple of months before, not to mention if you were exchanging a much bigger amount.

If the euro remained 107 dinars the earnings would be a lot lower, and if it were 115 dinars – which according to the economists would be a real rate, i.e. the rate which would be suitable for the strength of our economy – you would have lost.  In fact, the savings in dinar is cost-effective not because of the higher interests but because of the decline of the euro; so the profit was made on the differences in rates.

This is, actually, nothing new. The national bank did a similar calculation for the entire past decade and it showed that savings in dinars is much more cost-effective than in foreign currency. The former governor Radovan Jelašic has persuaded the citizens for years that the savings in dinars is more cost-effective and to save their money in dinars. But – it didn’t work.

 (The entire text in our printed edition)

source: Novi magazin
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