Today, the National Bank of the Republic of Macedonia Council held its first session.

At the session, Council members were introduced to the model for medium-term macroeconomic projections - MAKPAM as part of the overall analytical framework for conducting monetary policy. This model is a product of several years of work, and it was subject to a number of stages of improvement and testing. The model is intended for the projection of the future movement of the domestic economy and, consequently, the necessary response of the monetary policy, which is an important input in the process of taking current monetary decisions.

Also, the National Bank of the Republic of Macedonia Council reviewed the latest Quarterly Report. Based on the latest available information it may be concluded that in 2011 the dynamics of key macroeconomic aggregates was generally in line with the latest projections of the NBRM. Estimates indicate that in 2011, the domestic economy grew by 3.3%, and, in line with the expectations, an average annual rate of inflation of 3.9% was realized. In the external sector, the latest available data indicate that in 2011 the external position was more favorable in relation to the previously expected (estimated current account deficit of 2.8% of GDP, as opposed to 4.8% of GDP in the October projection), mainly resulting from the increased current transfers in the last quarter. In 2011, the broadest money supply M4 registered slightly higher growth than expected, which on an annual basis equaled 9.7%. The annual growth rate of total loans in December was 8.5%, which is slightly below the projected level in the October projection.

In 2012, amid rising uncertainty associated with the development of the debt crisis in the euro area and expectations of adverse movements in foreign effective demand, the latest estimates point to higher than previously expected slowdown of the domestic economy, which is now estimated to be 2,4%. Estimates for the inflation remain unchanged, with the annual inflation rate in 2012 being expected to be 2%. The balance of payments current account deficit is estimated at 4.5% of GDP in 2012, which is within the previous projection, and it is estimated to be entirely financed by capital inflows net, allowing further accumulation of foreign reserves and maintaining over 4 months of import coverage with foreign reserves. Within the banking sector, in line with the estimates for somewhat slower growth of the domestic economic activity and increased uncertainty associated with the prospects of the global economy, the growth of monetary and credit aggregates is expected to be somewhat lower than previously expected, with the broadest money supply M4 and banks' total loans on an annual basis being higher by 9% and 7.6% respectively. Given the highly uncertain global environment, macroeconomic projections for 2012 are associated with numerous risks, which requires constant monitoring and detailed analysis of recent macroeconomic developments in order to timely adjust the monetary policy.

At today's session, the National Bank Council adopted the Decision on amending the Decision on banks' liquidity risk management. Considering the current developments in the international financial markets and the great uncertainty about future developments in the euro area, this Decision is supposed to strengthen the requirements regarding the quality of liquid assets for the calculation of the liquidity ratios. Thus, in determining the liquidity ratios, only claims on foreign banks with investment credit rating of at least BBB-(according to the rating of "Standard & Poor's") or Baa3 (according to the rating of "Moody's") may be included, unlike the previous decision by which the calculation of the liquidity ratios included claims of all foreign banks regardless of the credit rating. These changes will apply starting from March 01, 2012.

The Council has also discussed other issues within its jurisdiction.

Governor's Office