6 November 2021

The denar remains stable - the fixed exchange rate is a key anchor of the stability of the Macedonian economy. The foreign reserves reached Euro 3.7 billion in September and given the good external position, we expect that they will remain stable in 2022 and 2023, maintaining adequate coverage. The external risks are further mitigated by the repo line approved by the European Central Bank to the National Bank. These are some of the findings of the credit rating agency Fitch, presented in the report which confirms the credit rating of the country.

The report emphasizes the reduction of the key interest rate to the historically lowest level and the Fitch's expectation for a loose monetary policy of the National Bank in the next period, in the absence of an increase in the inflation the next year and in the absence of further pressures on the domestic foreign exchange market.

The credit rating agency also points out that the Macedonian economy has a history of low inflation and financial stability supported by credible macroeconomic and financial policies, which corresponds to the successful maintenance of a stable denar exchange rate. The report also emphasizes that currently, the access to external financing is favorable, while foreign investments are resilient.

Fitch estimates that the banking sector has maintained the strong foundation, despite the pandemic shock and the gradual abolition of financial sector measures to "alleviate" the financial burden on households and businesses. It states that the banking system is adequately capitalized and profitable.

The report also notes that although the deferral of loan collection was almost fully completed in the first quarter of this year, it did not lead to a significant increase in non-performing loans. Namely, compared to the end of last year, the rate of non-performing loans increased by only 0.1 percentage point and on June 30 this year amounted to 3.4%, as stated by the credit rating agency.