Skopje, 16 December 2023 

The inflation is expected to decrease in the following year with further stabilization of the food and energy prices on the world markets, in the absence of greater external and domestic shocks.  In the medium run, the inflation rate would reduce to its record average of 2%.  In the period ahead we should pay attention to structural policies which would increase the domestic production and reduce the sensitivity of the domestic economy to future possible shocks, said the Governor Anita Angelovska Bezhoska in an interview for Slobodna TV.  

Discussing the latest inflation data, the Governor pointed out that since the fourth quarter last year, when the highest rate of about 20% was reached in October, the inflation rate has registered a steady decline.  “The latest statistical data in October, as well as in November, with rates of 3.5%, i.e. 3.1%, showed the downward trend.  The latest October forecasts show an average annual inflation rate for 2023 of around 9.5%.  This trend is expected to continue in the following year, assuming that there will be no significant external, or domestic shocks, thus, in the medium run, our economy would reach the historical average of around 2%” pointed out Angelovska Bezhoska and added that the National Bank has similar expectations with the European Central Bank for the inflation movements in the Euro area and the EU, which expects to reach the target inflation of 2% in 2025.  

Angelovska Bezhoska pointed out that the monetary policy setup contributed to inflation reduction.  Similar to other central banks since the beginning of the crisis, our central bank started tightening monetary policy, since the end of 2021 through the foreign exchange market operations.  “We started moderately, as the central banking community mostly did, and continued with stronger tightening of the monetary policy with interest rates.  Considering the structure of our economy and our financial system, we did not limit ourselves to acting through interest rates, but we were also actively involved through the liquidity channel, and used the available monetary and macro-prudential instruments”, said the Governor.    

The inflation depends on many variables, thus it is crucial to conduct prudent macroeconomic policies, to maintain positive trends and stabilize inflation and inflation expectations on a long-term basis, said Angelovska Bezhoska.  She emphasized the importance of structural policies in increasing the supply and its harmonization to demand, and reducing the vulnerability of the domestic economy, which as a highly opened economy with trade openness 140% of GDP, is extremely exposed to shocks.  Besides being dependent on energy imports, our economy has low energy efficiency, i.e. to produce one GDP unit we spend three times more energy compared to the EU.  Factors that additionally affect the inflation are the degree of effective competition, i.e. economies with greater effective competition have lower price pressure, as well as the conditions on the labor market.  If we operate on all of them, through structural policies, the resilience of the economy would increase.