Today, the National Bank of the Republic of Macedonia Council held its fifth session at which the latest Quarterly Report was discussed and the most recent macroeconomic projections were presented.
Today, the National Bank of the Republic of Macedonia Council held its fifth session at which the latest Quarterly Report was discussed and the most recent macroeconomic projections were presented.
Early in the first quarter of 2013, the National Bank reduced the interest rate on CB bills from 3.75% to 3.5%, against the background of assessments for relatively favorable conditions, from a monetary viewpoint. The amount of foreign reserves at the end of last year exceeded the expectations, while at the same time inflation stabilized at somewhat faster pace than expected, indicating a reduction in inflationary pressures caused by the growth of import and regulated prices. Indicators of economic activity pointed to further anemic condition of the economy, and similar signals came from the credit market. However, by the end of the quarter, monetary policy remained unchanged, amid already made monetary easing through interest rate and the reserve requirement. Given that changes in monetary policy have a certain delayed effect, it was expected that the conducted monetary easing will have some stimulating effects on the economy in the future. Restraint from additional monetary changes in this period was underpinned by the presence of certain risks for the monetary policy, which were reflected through a relatively high core inflation and a narrowing of the margin between the Denar and foreign exchange savings.
The new projections of the National Bank still suggest slow economic recovery of the domestic economy, i.e. in 2013 GDP growth of 2.2% is expected, while in 2014 growth is expected to accelerate to 3%. Key drivers of growth in 2013 will be exports and investment, while in 2014, beside these two factors, private consumption is expected to make additional contribution to growth. This growth is expected to be supported by some acceleration in the rate of credit growth. In 2013, the current account deficit is projected at around 4% of GDP, while in 2014, due to higher imports associated with new investment flows, it is expected to increase to 6% of GDP. However, the expected capital inflows, mainly based on foreign direct investments and government borrowing, will be sufficient to finance the higher deficit and to accumulate additional reserves. In such conditions, it is estimated that in the projection period foreign reserves will be maintained at an adequate level.
Data on the movement of domestic prices in the first three months of the year indicate the faster deceleration in the inflation rate compared with the expectations in the January projection. Lower initial conditions, accompanied with downward revision in import prices resulted in lower inflation rate in 2013 of 2.8% (3.2% in January), while in 2014 it is expected to continue to advance to its historical average, thus being equal to 2.3% on an annual basis.
The risks around achieving this macroeconomic scenario continue to be mainly of external nature, and are associated with the possible changes in the dynamics of recovery of the global economic growth and fluctuations in the prices of primary products in world markets.
At today's meeting, the Council adopted the new Decision on issuing licenses, in accordance with recent amendments to the Banking Law, regarding the precise definition of the criteria that must be met by legal entities and natural persons before they are granted a license for founding and operating of a bank. In accordance with the Banking Law, a person with special rights and responsibilities is a natural person who is a member of a Supervisory Board, Management Board, Audit Committee, Risk Management Committee and any other managers in the bank, which under its charter are defined as persons with special rights and responsibilities. The new Decision introduces forms not only for the persons proposed for members of the Supervisory and Management Boards of the bank, but for all persons with special rights and responsibilities. Also, the new Decision precisely defines the relevance of the duration of the legal consequences of judgments in deciding to issue licenses, also according to the Decision of the Constitutional Court of the Republic of Macedonia from July 2008. The new Decision distinguishes the case of status change in a savings house from the transformation of a savings house into a bank.
The new Decision on issuing licenses results from the amendments to the Banking Law from February 2013, and from the practical problems that have emerged in the implementation of the previous decision. The new Decision, despite the technical adjustments to the law, contains an extended list of data that must be submitted with the application for issuance of the approval for the members of the Supervisory and Management Boards of a bank. This specification aims to evaluate the performance criteria associated with the possibility for a member of the Supervisory or Management Boards to be a member of management and supervisory bodies of other legal entities or criteria related to having a material business relationship with that bank.
The Decision amending the Decision on the credit risk management and the Decision amending the Decision on the manner of determining affiliated persons were subject to technical compliance with the Banking Law.
The Decision amending the Decision on the terms and conditions under which residents may conduct payments in foreign currencies in transactions with non-residents, among other things, allows shops and bars that are located in the border area of ??the airports or between customs offices at entry and exit from the country, and which do not have the status of duty free shops, to make and collect payments in foreign currencies.
At today's session, the Council discussed other issues within its jurisdiction.