Skopje, 10 October 2002
Press release of the NBRM
Adopted reports on the monetary, foreign exchange and supervisory activity of the National Bank of the Republic of Macedonia in the first half of 2002
The National Bank of the Republic of Macedonia Council held its 102nd session on October 10, 2002, at which several reports and decisions on the monetary, foreign exchange and supervisory sphere were discussed and adopted.
The National Bank of the Republic of Macedonia Council adopted the semi-annual report of NBRM for the first half of 2002. The Council members concluded that the security and economic crisis faced last year, had constant negative impact on the functioning of the Macedonian economy in the first half of 2002, as well. Thus, during this period, reduced economic growth was registered given the significant decline of the industrial output, increased deficit in the foreign trade and reduced number of employed persons. However, despite all difficulties the National Bank of the Republic of Macedonia was facing with during the first half of 2002, it succeeded in meeting its obligation defined in the Constitution of the Republic of Macedonia and in the Law on the National Bank of the Republic of Macedonia, and that is preserving of the price stability i.e. the Denar exchange rate. In the January - June 2002 period, the average inflation rate retained the low one-digit level of 2.5%. Despite the insignificant oscillations of the Denar exchange rate recorded in the first half of 2002, the National Bank of the Republic of Macedonia succeeded in retaining stability of the Denar exchange rate.
In order to maintain the price stability (as an ultimate objective of the monetary policy) and create environment for sustainable economic growth on a long run, the National Bank of the Republic of Macedonia continues to apply the strategy of targeting the Denar exchange rate. In accordance with such a monetary strategy, the Central Bank took active participation in the foreign exchange market in the first half of 2002, in order to close the gap between the demand and the supply of foreign exchange, enabling maintenance of a stable exchange rate. During the first six months of 2002, the CB bills auctions were the main instrument for regulating the liquidity of the banking system.
At the end of the first half of 2002, the money supply M1 (currency in circulation and demand deposits) equaled Denar 24,985 million, which was higher by Denar 4,772 million or by 23.6% on annual basis, while the total deposits of the non-government sector (sight deposits, time deposits up to and exceeding one year) equaled Denar 39.496 million, which is an annual increase of Denar 12,418 million or by 23.9%. The credit activity of the banking sector in the first half of 2002 was directed towards supporting of the economic flows. The total placements of the banks with the non-government sector equaled Denar 48,036 million as of June 30, 2002, which is an increase of Denar 2,376 million or by 5.2% compared to the end of the previous year. In comparison with June 2001, they increased by Denar 2,541 million, or by 5.6%.
The National Bank of the Republic of Macedonia Council adopted the Report on the Banking Supervision and the Banking System in the Republic of Macedonia in the First Half of 2002. In the January - June 2002 period, the NBRM undertook activities towards: making changes and improving the legal framework of the banking supervision; implementation of the licensing function; permanent off-site surveillance and on-site examination of the banks’ and savings houses’ operations; undertaking corrective actions towards banks and savings houses, etc.
During the first half of 2002, no changes in the number of banks and savings houses were recorded. Same as at the end of 2001, there were 21 banks and 17 savings houses in the Republic of Macedonia as of June 30, 2002. However, 18 banks were licensed to conduct financial operations which include international payment operations and international credit and guarantee operations, while the other three banks were licensed to conduct payment operations and credit and guarantee operations in the country. The average capital adequacy ratio of the banks in the Republic of Macedonia equaled 27.5% at the end of the first half of the year, which means solid solvency. On the other hand, the highly risky placements equaled 17.4% as of June 30, 2002, which means that there is mild upward trend in the quality of the banks’ credit portfolios.
In addition, the National Bank of the Republic of Macedonia Council also adopted several decisions from the supervisory area, which means harmonization with the legal framework.
At the end, the Council members were informed about the results from the latest negotiations of the Financial Committee for distribution of the financial assets of the former SFRY.
Governor’s Office