At its tenth session held today, the NBRM Council has discussed the latest Quarterly Report and the recent macroeconomic projections. 

After the relaxation in the second quarter, the National Bank did not change its monetary policy setup. In the third quarter of 2012, global economic prospects further deteriorated, emphasizing the risk of recession and the weaker economic recovery in the euro area in the period ahead which, in turn, materialized the risks of slower economic growth in the domestic economy. On the other hand, the rise of import prices, primarily oil and food, increased the level of prices in the domestic economy which in the third quarter accelerated the inflation rate above the NBRM projections. External sector experienced generally stable developments, while the foreign reserves increased as projected. The further deterioration of global economic environment increased the downward risks on the exports and the capital inflows.  

Taking into account the high trade integration of the Macedonian economy in the euro area, the recent projections indicate moderate deterioration of the macroeconomic picture of the domestic economy in the period ahead relative to the previous expectations. Given the higher inflation rate in the third quarter and the upward revisions of projections for the import prices of energy, the average inflation is projected at 3.4% in 2012 and 3.5% in 2013. In 2014, the inflation is expected to stabilize and to go back down to about 2.6%. In spite of the upward revision, currently, inflation trends are not considered to be highly risky, taking into account that the inflation accelerated due to factors on the supply side, which, in conditions of expectations for poor domestic demand, alleviated the risk of higher transmission effects on other prices in the economy. 

The slower global economic growth, deteriorated expectations, lower income available for consumption and the increasingly resilient imports are factors behind the potential stagnation of gross domestic product in 2012, although it was expected to increase by roughly 1%. Domestic economy is expected to start recovering in 2013 with higher exports and investments, and the GDP growth is projected at 2.6%. The positive investment cycle is expected to continue in 2014, which along with the improved expected export performances and the perceived revival of private consumption would accelerate the economic growth to 3.4%.   

According to the latest National Bank projections, the banking sector will keep on providing a solid financial support to the economic growth. In this light, banks' lending activity is expected to accelerate by around 7% this year and to increase to 9-10% the next two years.  

Analyzing the external sector, the projections for current account deficit remain the same as for 2012 (2.8% of GDP). Current perceptions indicate slightly higher current account deficit of 3.8% of GDP for 2013, which is expected to be fully funded by capital inflows. Current account deficit is expected to widen significantly to 5.9% of GDP in 2014, which is in line with the perceptions for faster economic growth. Such developments generally arise from the expectations for faster import growth as a result of the investment and private consumption. On the other hand, the projections point to higher capital inflows, primarily on the basis of foreign direct investments, which would ensure higher foreign reserves and their maintenance at adequate level. 

At its today's session, the Council has also discussed other issues within its competence. 

Governor's Office