Today, the National Bank of the Republic of Macedonia Council held a session at which it discussed and adopted several decisions and information from the scope of the Bank's operations. 

Skopje, 31 March 2005

Press release of the NBRM

Today, the National Bank of the Republic of Macedonia Council held a session at which it discussed and adopted several decisions and information from the scope of the Bank's operations. 

The National Bank Council reviewed the latest macroeconomic developments. The data show that in February 2005 a monthly inflation of 0.5% was registered. In trhe first two months of 2005, compared to the same period of the pervious year, the volume of the industrial output increased by 7.6%. In the external sector, in January 2005, the export and the import registered an annual increase of 33.2% and 7.7%, respectively, while the trade deficit reduced by 27.5% and the import-export coverage ratio increased by significant 12.5 percentage points. The preliminary data about February show further retaining of the positive trend, so that in the first two months of 2005 a cumulative growth of the export and of the import of 29.9% and 15%, respectively, was registered, as well as a reduction in the trade deficit of 9.7% and export-import coverage ratio retained at the level of 70.5%. Such changes led to favorable movements on the foreign exchange market, with the NBRM making a net-purchase on the foreign exchange market of US Dollar 18.5 million. Despite the higher reserve requirement, in February 2005, the total amount of credits extended to the non-government sector registered an annual increase of 26.4%, with the money supply M2-denar part increasing by 17.4% and the level of banks' short-term lending interest rates remaining almost unchanged.

The NBRM Council also discussed several issues related to the monetary statistics. The Council passed a Decision on determining the manner of calculating representative interest rates of the banking sector. The new methodology provides for more accurate calculation of the representative interest rates of the banking sector on received deposits and extended credits and presentation of the interest rates and interest rate spreads according to the currency and maturity structure.

The Council reviewed the recommendations of the National Bank's supervision to the banks concerning the improvement of the internal control systems, the internal audit design, the role of the external audit and the relation among the internal audit, external audit and banking supervision. In addition, the Council considered the recommendations to the banks for improvement of the systems for money laundering prevention, for accounting and regulatory treatment of the assets leased or taken under a lease and the recommendations for improving the banks' information system security. These recommendations enable easier understanding of certain new developments from the area of prudential banking practices and standards. At the same time, they give more precise guidelines for their application in the banks' operations. Regarding these recommendations, the Central Bank will organize consultative meetings with the commercial banks for the purpose of their accepting and more efficient application.

 The research paper "Monetary Transmission through Interest Rates in the Republic of Macedonia", developed by the NBRM employees, was presented to the Council. The results of this quantitative research show that the monetary policy was not a dominant factor in the banks' setting of the interest rates level. It is assessed that the following factors significantly influenced the banks' setting of the interest rates: the level of saving, the credit portfolio quality, the interest inelasticity of the households' demand for credits. All these factors, together with the shallow financial market, still restrict the possibilities of the Central Bank for making a shift toward another monetary strategy.

Governor's Office