Today, the National Bank of the Republic of Macedonia Council held its regular session at which the latest Quarterly Report was discussed and adopted. The Council once again emphasized that the latest reduction in the policy rate during last year was made in conditions of favorable external position and stable expectations of economic agents. At the same time, the Council again emphasized that this monetary easing is adequate to the existing economic and financial conditions, amid sound economic fundamentals and absence of imbalances in the economy.
When discussing the Report, at the meeting it was concluded that the comparison of the latest macroeconomic indicators with their forecasted dynamics within the October forecasting round does not indicate significant deviations in the individual segments of the economy. According to the published estimated GDP data, the economic activity in the third quarter of the last year registered a growth of 3%, which is somewhat higher than forecasted in the October forecasts. This upward deviation is mainly due to the higher growth in exports, i.e. the more favorable net external demand, as well as with the higher growth in public and private consumption compared to the expectations from the October forecasts, while the decline in gross capital formation is larger than expected. The annual GDP growth in the third quarter of 2018 was supported by both net exports and domestic demand. The balance of payments data in that quarter indicate better performance in the current transactions than planned, while the flows in the financial account had somewhat weaker realization than expected.
The Council also concluded that the currently available high-frequency data for the last quarter of the previous year indicate continuation of the more favorable developments in the economy, followed by favorable expectations for the growth of industry. Certain indicators also indicate an improvement of the construction sector compared to the previous part of the year. Private consumption registered an increase. Favorable movements were registered in total investments, due to the private sector investments, while the nominal data indicate a potentially slight widening of the trade deficit in the fourth quarter compared to the same period last year. The latest available data on gross foreign reserves for the fourth quarter of 2018 point to quarterly growth, as opposed to the moderate decline expected with the October forecasts. According to all adequacy indicators, they are still maintained in a safe zone.
At the same time, at the session, it was separately emphasized that, as noted in the Report as well, in the fourth quarter of the last year, the annual growth of domestic prices slowed down from 1.6% in the third to 1.2% in the fourth quarter. This slowdown reflects the slower growth in energy prices, in accordance with the movements in oil prices and oil derivatives in world markets, as well as the slower movement of core inflation. On the other hand, the food component of inflation registered a slight acceleration in the growth. For the entire 2018, the inflation rate amounted to 1.5%, mostly as a result of the shifts in the core component, and less of the positive contribution of the energy and food component.
Within the discussion on the adopted Report, among other things, the Council emphasized that in the last quarter of the previous year the growth of both the deposit base and the bank lending continued, which signals stable expectations and increased confidence. On an annual basis, total loans in December increased by 7.3%, which is within the expected growth rate with the October forecast, while the annual growth rate of deposits in December equaled 12.1% which exceeded the forecast for the end of the year. The accelerated credit growth is mainly a result of the increased credit support to the corporate sector, while the deposit growth is mainly a result of the household deposits.
At the meeting, the Council adopted a Decision repealing the Decision on requirements for securities in which an authorized bank may invest abroad. The adoption of this Decision follows after the announcement on the entry into force of the Decision on the transition to the second phase of the association between the Republic of Macedonia and the European Community and its member states, according to the Stabilization and Association Agreement, in order to further liberalize the flows from the capital and financial account.
The Council has also discussed other matters within its jurisdiction.
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