On December 22, 1998, the National Bank of the Republic of Macedonia Council held its LXVIII session, discussing the accomplished macroeconomic developments in 1998, as well as other issues from the monetary and foreign exchange sphere.

Skopje, 22 December 1998

Press release of the NBRM

On December 22, 1998, the National Bank of the Republic of Macedonia Council held its LXVIII session, discussing the accomplished macroeconomic developments in 1998, as well as other issues from the monetary and foreign exchange sphere.

The National Bank of the Republic of Macedonia Council concluded that as in the previous year in 1998 the main objective of the monetary policy was achieved - maintaining low and predictable inflation rate, which for the first eleven months reached 1.0%. This means continuation of the three-year price stability, which makes the Republic of Macedonia the most successful among the countries in transition. It was emphasized that the price increment in 1998 was lower than the projected one, due to the unexpected significant decline in the prices of agricultural products by 10.7%, which was a result of the deteriorated placement of these products in the markets of former Yugoslav republics and Europe. The Council concluded that it is a remarkable fact that the low inflation in 1998 supported the development, because there was a simultaneous growth of the industrial production by 5.7%, and it is estimated that the real growth rate of GDP in 1998 shall amount to approximately 4%. Economic growth is generated by export, which increased by 11.1%, and was a result of the improved price competitiveness after the devaluation of the Denar, as well as of the decreased unit labor costs.

In the first eleven months of 1998, money supply increased by 13.9%, which in conditions of 1% inflation and real growth of the GDP by 4%, means that a real growth of the money supply amounted to 9%. In that manner, the monetary policy fully supported the achieved economic growth, without losing control over the inflation.

As basic problems of the economic policy in 1998 were pointed out the increase in the arrears among economic entities and the minimum decrease in the unemployment.

The Council concluded that regardless of the pressures imposed on the foreign exchange rate during October and November, the Denar value remained unchanged, with a simultaneous increase in the foreign exchange reserves. Thus, in 1998 there was a net purchase of foreign currency from the foreign exchange market in the amount of USD 32 million, which exceeds the projections by USD 5 million. This enabled an increase in the gross foreign exchange reserves of the National Bank by USD 56 million, whereas net foreign exchange reserves increased by USD 44 million.

The NBRM Council reviewed the Information regarding the introduction of the EURO, as well as the consequences of its introduction in the Republic of Macedonia. It was estimated that the Information thoroughly elaborates the process of economic and monetary unification of the European countries, as well as the implications that the introduction of the EURO shall have on the denar exchange rate, banking and economic subjects, and legal regulations in the Republic of Macedonia. In that respect, the Council adopted the amendments to two operative Decisions which put in action the activities regarding the introduction of the EURO in the Republic of Macedonia. The amendments to these Decisions provide for substitution of the European Currency Unit (ECU) with the EURO becoming effective from January 1, 1999, as well as change in the manner of calculating the denar exchange rate against all foreign currencies (except for the German mark), where starting January 1, 1999 the cross exchange rate of the EURO determined by the European Central Bank will be taken into account.

The NBRM Council took a Decision and Instructions on obligatory reporting of economic entities which are related on the basis of inward and outward investments, which will enable more accurate statistical evidence of foreign investments in the Republic of Macedonia. Namely, in order to improve the statistics of the capital and financial accounts of the balance of payments, the National Bank of the Republic of Macedonia prepared a questionnaire which will provide for more precise data on direct and portfolio investments.

The NBRM Council adopted the amendments to two Decisions which enable the Deposit Insurance Fund to make direct placements of own funds at the auctions of bills with the National Bank of the Republic of Macedonia.

Finally, the Governor of the National Bank of the Republic of Macedonia informed the Council about the dynamics of banks' efforts to meet the capital census necessary for conducting payment operations with abroad.

National Bank of the Republic of Macedonia Council