Speech of Vice Prime Minister and Minister of Finance of the Republic of Macedonia, Zoran Stavreski at the occasion of marking the 20-year anniversary of the monetary independence of the National Bank of the Republic of Macedonia

Dear Mr. Dimitar Bogov, Governor of NBRM, Honourable Governors, Honourable former Governors, Respectable Ladies and Gentlemen,

It is my honour to address you at today’s Conference, organized at the occasion of marking the 20th anniversary of the monetary independence of the Republic of Macedonia. Monetary independence, being significant symbol of the statehood and the independence of Macedonia is exceptionally significant moment from a historical point of view, being not less important from an economic standpoint as well, since it points out to readiness of a country to introduce its own currency and design and conduct its own monetary policy. From today’s perspective, one can conclude that, in the past 20 years, the National Bank of the Republic of Macedonia significantly contributed to maintaining macroeconomic stability and, subsequently, it played an important role in the development of Macedonian economy. I believe it will continue yielding results in future as well. Disciplined fiscal policy, continuously keeping low budget deficit level, has crucially contributed to macroeconomic stability. Hence, fiscal policy remains to be aimed at supporting the monetary strategy of targeting Denar exchange rate, successfully being implemented for a longer period already. Such setup indicates solid monetary and fiscal coordination to the end of realizing the macroeconomic policy objectives, those being the following: maintaining low level of inflation and ensuring economic growth. Macroeconomic policy of Macedonia has adequately coped with the challenges arising from the hit of the biggest global economic crisis in the last 80 years. In 2009, when EU Member States and Southeast European countries registered real decline of the economic activity, Republic of Macedonia was the country with the third lowest GDP decline of 0.9%. This situation was similar in 2010 as well, when we again realized one of the best performance in Europe with 1.8% GDP growth, as well as in 2011, when in conditions of continued effects from the crisis, Macedonian GDP surged by 3%. Sound performance in the crisis years is mostly due to the reforms implemented prior to and during the crisis period. In conditions of crisis, despite the global financial distortions, Macedonian financial sector remained stable. Banks, as pillar of the Macedonian financial system, have continued to underpin the economy and, at the same time, kept both the liquidity and the solvency. As a result of the measures undertaken by both the Government and the National Bank, citizens and economic entities have kept the confidence in the banking system, which has contributed to permanent growth of the deposit potential of the banks. Recovery of the economy was mainly realized through gradual strengthening of domestic demand in conditions when external demand remained distorted. As regards domestic demand, the main driving force of growth, in particular in 2011, were the investments. Improvement of Budget structure contributed to intensification of investments and increase of capital expenditures as percentage of the Budget. In 2010, they increased by 14%, and by 15.5% in 2011.

Second important factor for the strengthened role of investments in the economy is the foreign direct investments. Efforts to attract foreign investments have contributed to buffer the hit of the global crisis. In the recent years, Macedonia is ranked high in the renowned “Doing Business” Report of the World Bank, which evaluates the conditions for running a business. In 2011, Macedonia was ranked on the high 22nd place in the world, compared to the 96th place back in 2006. In the last 5 years, Macedonia is among the first 5 countries in the world with most reforms implemented. Credit for the significantly improved environment for doing business has also been given by other renowned institutions. More moderate recovery of the economic outlook in 2011, in 2012 it is expected for Southeastern European countries to face new challenges as a result of the debt crisis and the appropriate consequences arising from the debt crisis. This especially emphasized the need for sound public finance and the need to continuously implement structural reforms. Fiscal consolidation and curbing the public debt are precondition for the Eurozone future and hence, there can be no exceptions. What can and should only be discussed is the pace of fiscal consolidation. IMF itself, has urged, at several occasions, to caution, using automatic stabilizers of fiscal policy, to the end of faster economic recovery. In addition to the adverse effect on the short-term economic recovery, some countries, implementing intensified fiscal consolidation, also increased indirect taxes, having negative effects on the broad developments in those countries. Macedonia, during the global economic crisis and the debt crisis in the European Union had low level of budget deficit, not exceeding 2.5% of GDP. At the same time, Macedonia did not increase the taxes and remained one of the countries with lowest level of public debt, accounting for 26.8% of GDP.

Thus, we have provided room to moderate anti-cyclical fiscal reaction in crisis period, without thereby jeopardizing the sustainability of the public debt and the public debt servicing on the medium term. Such performance provided, in conditions of highly uncertain global surrounding, for the adjustment of Macedonian economy to be appropriate and moderate, thus reducing the vulnerability of the economy. In 2012 and perhaps in future, Ministry of Finance, as well as the Government will be committed to the need to support economic activity and employment on one hand and the possibilities for financing the budget deficit and the need for further maintenance of prudent fiscal policy on the other, as main precondition for sound public finance. In addition, we together with NBRM will also focus on strengthening the financial infrastructure, whereby the banking sector stability and the development of domestic securities market will be our special challenge. Ministry of Finance and the National Bank, through the joint Financial Stability Committee, will continue the activities for strengthening the regulatory framework and adhering to the global standards in the field of the financial system.

Honourable Ladies and Gentleman, by successfully overcoming the challenges we faced during the biggest global and financial crisis in the past 80 years, we are again brought up against new challenges. Macedonia, as most of the SEE countries is strongly economically related to the EU Member States, and each shock in Europe is strongly felt in our country as well. So-far experience from the crisis has shown that macroeconomic management in conditions of uncertain global surrounding has to offer higher flexibility and strengthened coordination between monetary and fiscal policy as we have shown in practice. Probably, challenges will still lie ahead on the road to full normalization of economies, due to which we should continue to be committed to monitoring the developments and finding solutions, thereby taking into account the preserving of macroeconomic stability as the best climate for sustainable growth on the long run. 

Thank you for your attention