The Governor Angelovska Bezhoska presented the macroeconomic forecasts to the diplomatic corps and the international organizations

Inflation will keep decreasing and in the medium run it will reduce close to the historical average

Skopje, 18 May 2023

The Governor Anita Angelovska Bezhoska presented the most recent macroeconomic forecasts of the National Bank to the diplomatic corps and the representatives of the international institutions. The event, organized regularly after each macroeconomic forecasts round of the National Bank, was attended by representatives of the International Monetary Fund (IMF), the United Nations (UN), the United Nations Development Programme (UNDP), the Delegation of the European Union, as well as of the diplomatic representative offices of Albania, Slovakia, Bulgaria, the Netherlands, China, Italy, France, Switzerland, Spain, Kosovo, Sweden, Hungary, the USA, Greece, Germany and Slovenia.

Last year, inflation averaged out at 14.1%, which is in line with our forecast (14.2%), with the performance since the beginning of this year having matched our forecasts for 2023. Taking into account its movements so far, as well as the forecasts of the international financial institutions for fall/stabilization of food and energy prices, tightening of monetary conditions and other measures, inflation is forecast to slow down, i.e. it would reduce to a single-digit level of 8% - 9% in 2023, and in the medium term to further slow down to below 3%, as in the October forecast. In view of the geopolitical developments, risks to the inflation forecast remain, but for now, the IFIs predict a sharper drop in commodities prices, which points to certain downside risks. It is necessary to carefully monitor all measures affecting aggregate demand.

At the presentation, the Governor emphasized that the future setting of the monetary policy will depend on the inflation dynamics and inflationary expectations, as well as on the developments on the foreign exchange market and the level of foreign reserves. Currently, the external position of the domestic economy in this cycle is assessed as more favorable, with significantly less pressure on the current account in 2023, primarily due to the drop in energy prices. This has a positive impact on foreign reserves. In the conditions of expected solid flows in the financial account, it is expected that the foreign reserves will keep growing on an aggregate basis and will be kept at the appropriate level, which is necessary to maintain a stable exchange rate of the denar.

During the presentation, the Governor referred to the expectations for the economic activity. The growth of the Macedonian economy in 2023 is expected to be 2.1% (equal to that registered the previous year), and in the medium run it would accelerate to 3.6% in 2024 and 4% in 2025.

The banking system will further underpin the economic growth with a credit growth rate of 5.7% in 2023. In the medium term, the credit activity is expected to increase, which is in line with expectations for more dynamic economic growth and stabilization of expectations. As until now, the credit growth will further be supported by the deposit growth as the main source of financing. This year, the deposit growth is expected to accelerate and equal 6.9%, expecting also further solid growth in the following years, together with the recovery of the domestic economy and increased purchasing power of households.