On today's session, the National Bank Council discussed and adopted the Annual Report for the operations of NBRM in 2010.
Skopje, 21 April 2011
Press release of the NBRM
On today's session, the National Bank Council discussed and adopted the Annual Report for the operations of NBRM in 2010.
The Annual Report determines that the monetary policy in 2010 was conducted in more favorable environment compared to the previous year, which enabled gradual relaxation of the monetary conditions during the year. The interest rate on CB bills was reduced in seven occasions by totally 4.5 percentage points, and thus in December 2010 it reduced to the historically lowest level of 4%. Such a character of the monetary policy was enabled by the constant improvement of the trends in the external sector during the year and low inflation. In environment of favorable movements on the foreign exchange market, NBRM almost continuously registered net purchase of foreign exchange. It contributed to the increase in the gross foreign reserves by Euro 117, and on December 31,2010 it reached Euro 1,714.5 million..
The domestic economy registered slight real GDP growth in 2010 of 0.7%. The growth structure is a reflection of the positive contribution of the net export, given negative contribution of the domestic demand. The average inflation rate in 2010 equaled 1.6% and it was mainly caused by factors on the side of the supply. The mounting energy prices and, the higher food prices on the global market in the second half of the year, had the most significant effect on the inflation. Given the slow recovery of the economy and its functioning below the potential, no inflationary pressures through the demand channel were registered. The core inflation was minimal and it equaled 0.2%.
The external position of the Macedonian economy continued to improve in 2010, as well. The current account deficit reduced to 2.8% of GDP, which is a decrease of 4 p.p. compared to the previous year. Thus the negative gap on the current account pursued its downward trend for second consecutive year. The narrowing of the current account deficit is due to the increase in the net inflows through private transfers by 2.9 p.p. of GDP and lower deficit in the foreign trade of goods by 1.9 p.p., in conditions of higher rise in the export than import of goods. In 2010, the net inflows in the capital and financial account (without official reserves) equaled Euro 231.6 million, or 3.4% of GDP, thus enabling full funding of the current account deficit and additional increase in the foreign reserves. From the aspect of the structure, the largest portion of the net inflows originates from the foreign direct investments and debiting through external borrowings.
Parallel to the economy recovery process in 2010, considerable positive movements were registered also with the total deposits and total bank credits. The increase in the money supply in the economy in 2010 was twice bigger than in the previous year, while the annual increase in the broadest money supply M4 at the end of the year reached 12.2%. The total deposits (with demand deposits) increased by 13.7%, annually (opposite to 7.1% in the previous year), given the higher Denar savings than foreign currency one. The more favorable global and domestic macroeconomic environment conditioned movements also on the credit market on the side of both, offer and demand for credits, and at the end of 2010, the credits registered twice higher growth rate of 7.1%, compared to the increase of 3.5% at the end of 2009.
In 2010, the National Bank continued to invest the foreign reserves in government securities and in short-term deposits with foreign central banks having high credit ratings and conduct macroeconomic policies.
The priority of the security and the liquidity of the invested foreign reserves, as basic principles in the management, conditioned directing of considerable part of the investments in safe and liquid securities, on the short part of the yield curve, and thus conditioned the realization of the foreign reserves from the aspect of profitability. The investments income in 2010 equaled Euro 22.2 million, with the total rate of return being equal to 0.82%, annually.
At the session held today, the National Bank Council discussed and adopted the Banking System and Banking Supervision Report in 2010, as well. It was concluded that 2010 was more stable for the banking system. In conditions of more stable domestic macroeconomic environment, better expectations of the banking and real sector, positive signals of the macroeconomic policy of the National Bank, the banks' activities intensified. In 2010, the banks' assets increased by 13.7%, which is twice bigger growth rate relative to the rate realized in 2009. On December 31,2010 the total assets equaled Denar 305,290 million. This increase is considerably contributed by the investments in low risk securities (CB bills and Treasury bills) with 44.1% and credits of the nonfinancial entities with 30.5%.
The main driving force of the assets growth was the increase of the deposits of the non-financial entities, which on December 31.12,2010 reached Denar 213,270 million. In 2010 the deposits increased by 134.5%, which is by three times higher growth rate relative to 2009. Also, the depositors' propensity to save in domestic currency, which began in the last quarter of 2009, continued also in 2010. Thus in 2010, the Denar deposits incremented by 29.3%, while the foreign currency deposits increased by 8%.
The credits of the non-financial entities also grew intensively. On December 31, 2010 the credits equaled Denar 186,545 million. In December 2010, they registered an increase of 7.4%, which is twice higher than the increase in the previous year (when it equaled 3.5%).
In 2010, the trend of deterioration of the banks' credit portfolio quality was registered. On December 31,2010, the annual growth rate of the total non-performing loans (for all sectors, including also the financial institutions) equaled 9.3% and it is lower by 29.6 percentage points relative to the annual growth rate of the non-performing credits in 2009. The slowing down of the dynamics of the non-performing credits originated from their exclusively rapid growth in 2009, although they were influenced by the intensified collection of credits, including also the collection through foreclosure. The participation of the nonperforming loans of the non-performing sectors in the total credits equals 9.3% (in 2009: 9.1%).
In 2010, the liquidity of the banking system of the Republic of Macedonia considerably improved relative to the previous year. The volume of the liquid assets registered high annual increase (of 36.8%, i.e. by Denar 24,822 million), causing an upward dynamics of all liquidity indicators. The share of the liquid assets in the total assets equaled 31%. The coverage of the households' deposits with liquid assets reached 62.6%, while the short-term liabilities - 47%.
The solvency of the banking system is high. On December 31,2010, the adequacy ratio of the banking system equals 16.1%.
The banks' profit realized in 2010, in the amount of Denar 2,307 million, is higher by 37.7% compared to 2009. This increase enabled improvement in the basic profitability indicators. The return on the assets equaled 7.3% (in 2009: 5.6%).
On the today's session, the Council discussed and adopted several decisions among which are the Decision on amending the Decision on the manner and the procedure for establishing and implementation of the bank's program for money laundering prevention and financing of terrorism, as well as the Decision on amending the Decision on the manner and the terms under which the residents which are not authorized banks can open and hold accounts abroad.
For the purpose of harmonization with the new Law on the National Bank of the Republic of Macedonia from 2010, the Council adopted also new Statute of the National Bank of the Republic of Macedonia, as well several rulebooks related to the internal organization and operations of the Bank.
In order to comply with the new Law on the National Bank, on the today's Council session, Basic policies for the accounting record and financial reporting of the National Bank of the Republic of Macedonia and the Accounting policy for the claims and the potential liabilities of the National Bank of the Republic of Macedonia were adopted.
Governors' Office