Skopje, 26 August 1999

Press release of the NBRM

FROM THE 72nd SESSION OF THE NATIONAL BANK OF THE REPUBLIC OF MACEDONIA COUNCIL

On August 26, 1999, the NBRM Council held its 72nd session at which numerous documents referring to the latest economic developments in the Republic of Macedonia and to the realization of the monetary policy in the first seven months of 1999 were discussed.

The members of the Council concluded that after the termination of the war in the neighborhood, macroeconomic performance of the Macedonian economy significantly improved. It is primarily reflected in the accomplished annual growth rate of industrial output in July of 15.4%, with highest growth in the branches whose products are exported to the Yugoslav market, i.e. in Kosovo. Also, as a result of regaining the market of the northern neighbor, the export of goods in July increased by 32.7% compared to June, and the import increased by 18.5%. Realized deficit in the foreign trade in the first seven months of this year declined by USD 62 million, or 20.5% compared to the same period of 1998.

Due to the revitalized output and foreign trade, together with the inflow of foreign capital from donations, the supply of foreign currency on the foreign exchange and exchange offices market exceeded the demand. This enabled to maintain the denar exchange rate stability, and simultaneously to increase the foreign exchange reserves of the NBRM, which reached USD 404 million, which is the highest level since the independence.

The monetary policy supported the intensification of the economic activity through accomplishing high growth rates of monetary aggregates, with the M1 money supply reaching an annual growth rate of 27.5% at the end of July. The members of the Council concluded that such monetary growth and inflow of foreign currency resulted in improved liquidity of the banking system during July and August, which led to a decline in interest rates. Thus, in August the interest rates on NBRM deposit auctions were reduced to 14% p.a., which is by 4.5 percentage points lower than the level at the end of 1998, and almost twice lower than the level during the military crisis in the region. It is important to emphasize that the improved liquidity also reflected on the interbank money market, where the interest rate was reduced to 16.4% annually, which is by 3 percentage points lower than the level from December 1998. The members of the Council estimated that in the following period it is necessary to design the monetary policy carefully, in order to support further boost of investments and production activity in the Republic of Macedonia.

Governor's Office