Skopje, 7 May 2008

Press release of the NBRM

The Operative Monetary Policy Committee adopted a decision on increase in the interest rate of CB bills from 6% to 7%, on the session held today chaired by the Governor of NBRM. The Decision on increase in the interest rate resulted from the macroeconomic developments which indicated short-term and medium-term risks, which may negatively influence on the fulfillment of the monetary policy objectives.

The last data indicated that the annual inflation rate shows signs of stabilization, but also that the monthly rate, although with lower dynamics, registered growth, with simultaneous growth also in the average inflation. Also, the worsening of the external sector was especially important.  It showed that there was still a risk of further stimulation of the inflation expectations and worsening of the external economy position. Despite that the largest part of the rebalances were directly generated of external factors, yet, keeping the high credit growth rates, as well as the higher growth in the wages relative to the productivity, increased the risk of inflation pressures and of worsening of the external position on middle-term.

To be more specific, the monthly inflation rate amounted to 0.4% in April, which compared to the previous two months it declined by 0.4 percentage points, and the average inflation rose to 9.7% (relative to February and March when it equaled 9.1 and 9.5%, respectively). The annual inflation rate (April 2008 relative to April 2007) was almost unchanged equaling 10.1% which was positive signal. But, generally, the level of inflation and the inflation expectations remained high. The last data also showed that the changes in the prices of food were the main driving force of the inflation, creating about 79% of the annual change in the inflation in April. The minimal decrease in the basic inflation (inflation with food and energy being excluded) to 2.6% was positive signal in April, relative to 2.7% in March. 

In the external sector, which is especially important for both macroeconomic performances and macroeconomic stability maintenance, in the first quarter of the year the deepening in the trade deficit continued, which was higher by almost 80% on annual basis, with significantly lower growth in the export being registered (9.5%) relative to the import of goods (30.8%). Almost half of this change reflected the enlarged deficit in the trade of energy. However, considering the growth in the import of the consumption goods (only a part of which was a result of the price effect of the growth in the import prices of food), the rapid growth in the commercial credits, as well as the growth in the wages can be stated that contributed to external rebalances creation.  

After the exceptionally high growth in the credit participation in GDP in 2007, the rapid financial deepening continued also in the first months of 2008. The annual growth rate of credits reached up to 42.2% in March, with almost 60% of annual growth in the credits to the households being registered. In conditions when large part of the credits to the sector "households" came as a result of the growth in the commercial credits, such financing of the personal consumption additionally stimulated the inflation pressures, and also contributed to worsening of the current account of the balance of payments.

Keeping the price stability and the stability of the foreign exchange rate were in the focus of the monetary policy, because of which NBRM kept the firm position for undertaking all necessary measures, that will mean stabilization of the inflation and the inflation expectations, restriction of the pass-trough effect of the prices of food and energy on the wages and the on other prices in the economy, and maintenance of the foreign exchange rate stability, for the purpose of which it has an adequate level of foreign reserves at its disposal. Of course, the contribution that the other market participants may give will be of great significance for realization of the National Bank's goals.

Governor’s Office