Skopje, 20 December 2023 

The National Bank policy rate remains 6.30% - the current monetary setup appropriate to the conditions in the economy

On 19 December 2023, the National Bank’s Operational Monetary Policy Committee held a regular meeting and discussed the latest data and information on the global and domestic economy and the latest developments on the international and domestic financial markets in the context of the monetary policy setup.

At this meeting, the Committee decided to keep interest rates unchanged, in conditions of significant slowdown in inflation and favorable foreign exchange market, but also amid still present risks. Thus, the interest rate on CB bills remains 6.30%, with simultaneous maintenance of the interest rates on overnight and 7-day deposit facilities at the levels of 4.20% and 4.25%, respectively. The supply of CB bills at the regular auction remains unchanged and amounts to Denar 10 billion. At its meeting, the Committee assessed that the maintenance of the current level of interest rates, together with the changes in reserve requirement (the last ones with application from December 2023) and with the macro-prudential measures undertaken so far, will contribute to further slowdown in inflation and maintenance of the stability of the exchange rate.

The latest monetary policy decision is based on the movements and assessments for the key monetary policy indicators. Domestic inflation continued to slow down and reduced to 3.1% on an annual basis in November 2023. These performances reflect the significant reduction of the pressure from the food and energy price components, as well as the reduced price pressures from the less volatile categories, in accordance with the undertaken monetary measures. Moreover, the annual inflation rate in our country slowed down significantly compared to the euro area, whereby the difference in inflation is insignificant. Consumers’ inflation expectations expressed in the November surveys of the European Commission are also more moderate. However, the average inflation rate remains at a relatively high level, compared to the historical average. Risks in terms of the future dynamics of prices are still present, which in addition to the uncertainty arising from the movement of prices in world markets, are also due to certain domestic factors. Hence, there is a need for further precaution, including in relation to the policies that affect the demand of the economy.

Regarding the policy of the European Central Bank (ECB), at the latest meeting in December it was decided to maintain the policy rates at the same level, amid assessments for further slowdown in inflation in the next year and attainment of the medium-term target inflation in 2025.

The foreign exchange market is stable and the movements are favorable. The level of foreign reserves at the end of November was Euro 3,963.7 million, which according to the international standards and indicators that are being followed and monitored, is an appropriate level to maintain the stability of the exchange rate of the domestic currency. From the beginning of the year, foreign reserves grew, given the favorable movements on the foreign exchange market and interventions with net purchase of foreign currency by the National Bank. The performances are the result of the reduced pressures from the energy crisis, and thus the lower demand by companies, the increased net purchase from natural persons as a signal of the confidence in the domestic currency, as well as the generally good foreign currency liquidity of the banks. The latest available data from the external sector for October 2023 currently indicate a slightly lower trade deficit for the last quarter of the year than expected according to the October forecast, with more favorable developments on the currency exchange market as of November 2023.

The growth of the economic activity is moderate and in line with the expectations, which according to the latest forecasts point to slower economic growth this year, amid lower foreign demand. The real GDP growth in the third quarter of 2023 amounts to 1.2% on an annual basis (after the growth of 1.1% in the previous quarter) and is in accordance with the growth forecasted for this quarter according to the October forecasting round. Analyzing by components, the growth results from net exports, coupled with the further growth of private consumption. Given the limited number of available data, it is still early to fully perceive the economic activity for the fourth quarter of 2023. For now, the data for October 2023 show solid positive developments in industrial output, as well as a slowdown in the real decline in the total trade turnover.

In the monetary sector, according to the initial data as of November 2023, deposits and loans continue to grow at a pace that is currently within the expectations for the last quarter of the year.

Generally, the latest data for the key macroeconomic indicators are mainly in line with the expectations. However, the conditions for conducting monetary policy remain uncertain and impose further careful monitoring of the dynamics and inflation factors and inflation expectations. Hence, there is a need for further precaution in the conduct of monetary policy, i.e. in the conduct of macroeconomic policies that affect the demand in the economy. The National Bank remains prepared to use all the necessary instruments and to take appropriate measures that will contribute to maintenance of the stability of the exchange rate, stabilization of inflation expectations and to medium-term price stability.