Skopje, 15 December 2021 

The key interest rate remains at 1.25%, and the amount of CB bills offered at today’s auction will be unchanged at the amount of Denar 10 billion.  This retains the accommodative monetary policy of the overall macroeconomic and financial conditions, which at the same time, contributes to further support of the credit flows in the economy.

This was concluded at the regular meeting held on 14 December 2021, when the National Bank’s Operational Monetary Policy Committee discussed the situation in the domestic economy, the developments on the international and domestic financial markets and the indicators of the domestic economy in light of the monetary policy setup.

The upward inflationary movements in our country and globally, are due to the global supply side factors, which according to the international financial institutions are expected to stabilize during the next year.  Given the current dynamics of recovery of the domestic economy, no pressures are perceived from demand on the price growth, also suggested by the movements of core inflation, which unlike the general price level is more moderate than expected.  At the same time, domestic inflation is in line with the price developments registered in the Euro area.  Hence, for the time being, there is no need for monetary reaction, but the need for vigilant monitoring remains.

Regarding the latest macroeconomic indicators of the domestic economy, in the third quarter of 2021, the gross domestic product registered an annual real growth of 3%.   These performances indicate that the recovery of the domestic economy continues, amid further immunization of the population.  In the first three quarters of 2021, the economy registered a real growth that averaged 4.6%, which is close to the expectations of the National Bank’s October forecast (forecast growth of 4.2%).  Analyzed by components, the growth in the third quarter is largely due to the positive contribution of domestic demand, amid growth and positive contribution in all categories (private consumption, public consumption and gross investments).  The net-export component also has a positive contribution, amid faster growth in exports compared to the growth in imports.  The currently available high frequency data for the fourth quarter of 2021 are partial and insufficient to have an overall view of the situation. The October data show a further more moderate real annual growth in total trade turnover, but also further unfavorable movements in the industrial output, annually.

In the period January-November 2021, the annual price growth averaged 3.1%, within the expectations in the October forecasting round (forecast of 3.1% for the whole year).  In this period, a more significant contribution to the growth is made by the domestic prices categories, which are related to the movements of prices of primary commodities on world stock exchanges, with the transmission effect of last year's increase in prices of a regulatory nature, as well as certain factors specific to the pandemic crisis in conditions of relaxation of restrictive measures. The annual inflation growth for November is slightly above the expectations, but the assessment period is short, while the uncertainty about the movement in the world prices of primary commodities remains, which requires vigilant monitoring. 

The monetary sector developments remain solid, and according to the data as of November 2021, the movements are currently within the forecasts for the latest quarter of 2021, in line with the October forecasts.

Foreign exchange reserves remain appropriate and in the safe zone. On cumulative basis, as of November, the growth of foreign reserves since the beginning of the year is in line with the autumn forecasts. In October 2021, trade deficit was lower than the expected for the latest quarter of the year, while the latest available data on currency exchange operations are mainly within the expected net inflows of private transfers for the fourth quarter of 2021, according to October forecast.

In November, the upward trend in the volume of trade on the foreign exchange market continued, which corresponds to the external economic environment of the domestic economy.  Foreign currency liquidity was met by banks whose external liquidity remains stable, which was also attributable to the National Bank sale of foreign currency.

The information about the spread of the new COVID-19 variant “Omicron” prevailed on the international financial markets, which caused growing uncertainty about the future global economic growth, employment and price movement.  Such conditions, as well as expectations for increased divergence of monetary policies of the FED and the ECB, affected the value of the euro against the US dollar, the prices of the safest government bonds increased, while the US government yield curve leveled.

Overall, the Committee concluded that so far the macroeconomic indicators are generally as expected and the perceptions for the monetary policy environment remain unchanged compared to the previous assessment. The uncertainty and risks posed by the COVID-19 pandemic persist. In the period ahead, the National Bank will carefully monitor the trends and potential risks and take appropriate measures, as necessary.