Skopje, 19th May 2014 (MIA) – International Monetary Fund expects growth of the Macedonian economy to strengthen and believes the envisaged growth of 3.5% to be achievable.
This was pointed out by IMF Chief of Mission, Ivanna Vladkova Hollar, after two-week discussions with the Government authorities, representatives from the National bank and the private sector in Macedonia.
She pointed out that external risks were on the downside, recommending that fiscal policy should focus on meeting the 3.5 percent of GDP deficit target.
– Private demand is stronger now, reinforcing the case for gradually withdrawing fiscal stimulus. Containing the central government fiscal deficit will be important to keep debt sustainable, Hollar said at the joint press conference with the Deputy Prime Minister and Minister of Finance, Zoran Stavreski, and the Governor of the National Bank, Dimitar Bogov.
She went on by saying that planned reduction of the deficit to 2.6 percent of GDP in 2016 remained appropriate, and laying out the measures that would deliver the adjustment would help to meet those targets.
She said that the financial system remained stable, while further relaxation of the monetary policy stance was not warranted, particularly as credit growth was picking up, and reserves have declined.
Should pressures on reserves develop, the NBRM should stand ready to raise its policy rate. According to her, labor market remained an issue, and unemployment reduction should be tackled by encouraging linkages between foreign enterprises and domestic firms, as well as ensuring a dissemination of new skills and technology.
Deputy Prime Minister Stavreski said that Government and IMF positions were similar.
– Macedonian economy has a good growth trend. We ended 2013 with 3.1% growth, and the expectations for this year are that growth will reach up to 3.5%, which is better than the initially projected growth in the Budget of 3.2%. Growth will be well balance between the investments and the consumption. Investments will be mainly supported by large infrastructure projects, while public wage and pensions increase will stabilize personal consumption, which is to be basis for more balanced growth in the course of this and in the coming years, Deputy Prime Minister pointed out.
According to him, fiscal policy was well set and the Government remained at the position to maintain moderate fiscal deficit.
– The deficit is projected at 3.5% and we are ready to defend it with the policies and the 2014 Budget execution. As regards the coming years, the strategy envisages gradual fiscal consolidation, which will correspond to the level of revival of the growth of the economy and the private sector and the investments of the private sector, Stavreski underlined.
He went on, adding that the budget deficit would be financed through a combination of domestic and foreign borrowing. Increase of foreign direct investments was expected in the coming period, he pointed out.
– In the coming 6 to 12 months, according to the announcements, there will be at least 10 or so new foreign investments to create new jobs and to contribute to further diversification of the export and to export and GDP increase, Minister of Finance stated.
NBRM Governor, Dimitar Bogov, underlined that monetary policy would continue focusing on Denar exchange rate stability and that, together with the fiscal policy, it would focus on maintaining the Macedonian economy balanced.
– Our assessments are that this stable climate continues in future as well. Foreign currency reserves in the last 30 days are already showing an upward trend, hence we expect for such trend to continue in the coming period as well, since we are approaching a period, from a seasonal point of view, when foreign currency reserves increase. According to our view, the decline of foreign currency reserves, which was expected in the first quarter this year, is behind us, and we are now experiencing an upward trend, Bogov underlined.
He also added that the monetary policy would be carefully focused on maintaining balance which, above all, was observed through the trends of the foreign currency reserves and the rends on the foreign currency market. IMF Mission stayed in Macedonia from 6th May.