Skopje, 1 December 2023

The domestic financial sector coped well with the global challenges and once again showed that it is resilient to shocks and has the capacity to deal with crises, as stated in the Financial Stability Report for 2022. At the meeting of the Financial Stability Committee, held on 27 November, the Financial Stability Report in the Republic of North Macedonia in 2022 was presented, with the necessary actions to be taken in order to implement the Bank Resolution Law also being discussed.

At the meeting of the Committee, discussing the indicators for the various segments of the financial sector in 2022, it was emphasized that financial stability has been successfully maintained, despite the complex operating conditions of the financial system. The total assets of the financial system are growing in 2022, but at slower growth rates. The total credit growth equaled 9.4%, which provided solid credit support to the corporate sector, which recorded a growth of 11.5%, and to the households, which increased by 7.3%. These credit growth rates are significantly higher compared to EU where they equaled 4.8%, 6.4% and 3.8%, respectively. It was concluded that the possibility of risk spillover among individual segments of the system is still limited due to the simple structure of the financial system, low mutual dependence and the absence of more complex financial instruments. The results of the stress testing and the special evaluations and simulations for the exposure to the interest rate risk presented in the Report indicate that the domestic financial system has the capacity to deal with shocks of greater intensity.

In 2022 the performance of the corporate sector was solid, and almost all corporate sector activities registered increase in the operating income and improved profitability. The profitability of the corporate sector increased by 19.8%, after the rise of 32.1% in 2021. Competitiveness indicators also point to improved corporate sector productivity that is mounting, at accelerated pace, for the second consecutive year. However, the liquidity risk remains the key vulnerability source for the domestic corporate sector, despite the improvement in operating efficiency in 2022. The financial indicators point to improvement in financial discipline, in terms of faster servicing of liabilities and faster collection of companies' claims. The liquidity needs of the companies were satisfied to a significant extent by the increased credit support of the banks, whereby in addition to long-term loans, which usually have the largest contribution, in 2022, short-term lending also intensified.

However, it was emphasized that the uncertain macroeconomic environment could be a source of vulnerabilities for the financial sector. Hence, the most important thing is the constant strengthening of the resilience of the banking and financial sector as a whole, and this is made possible by the macro prudential mandate of the financial regulators provided by the new Law on Financial Stability and by the macro prudential measures that can be taken.

At the meeting, information on the necessary activities related to the Bank Resolution Law were also discussed. The Committee determined the preparatory activities that the institutions should undertake in order to start applying the Law within the stipulated period, that is, from October 2025.