International Monetary Fund are optimists as regards the economic outlook in the country and expect accelerated growth next year, although they consider that external risks still remain.
 
This is the assessment of the two-week IMF Mission in the country, presented today by IMF Mission Chief, Wes McGrew, at the joint press conference with the Vice Prime Minister and Minister of Finance, Zoran Stavreski, and the Governor of the National Bank of the Republic of Macedonia, Petar Gosev.
 
McGrew underlined that fiscal target for the next year is adequate, considering that the scope for further easing of the monetary policy is limited. He pointed out to the existence of external risks higher than usual.
 
– Economic growth this year was slow, however, we expect for it to pick up next year. Negative forces leading to recession in 2009 and the beginning of this year seem to decline, export is increasing, interest rates are reducing, deposits are growing, coupled by solid liquidity of the banks, contributing to better performance and growth increase next year, McGrew said.
The Mission expects output to grow somewhat more than 1 percent in 2010, inflation to be around 1.5%, while growth to range between 3-3½ percent next year. He considers that both macroeconomic and fiscal stance remain to be adequate.
 
– Government’s deficit targets of 2.5 percent of GDP next year is appropriate in light of current conditions. This fiscal stance will help to support output and employment and minimize the need for spending cuts, while maintaining debt ratios at moderate levels, McGrew stated, adding that it is important to reduce deficits over the medium term to preserve low level of public debt sustainability to contribute to better performance in crisis situation.
 
– As regards monetary policy, the good conditions significantly contributed to reducing interest rates and IMF assessment is that scope for further easing is limited. He explained that as regards NBRM, the scope of easing is limited, and the commercial banks have room to reduce their interest rates.
 
Mission’s view is that the National Bank has reduced its policy rates over the past year, to 4.5 percent at present, assessing it as an appropriate response to the easing of external financing pressures in a context of weak growth and low inflation. One of the limiting factors for further easing, according to the Fund, is that the spread between the NBRM and European Central Bank policy rates has narrowed, and if this spread were reduced too much, this could lead to a shift towards foreign assets by Macedonian residents and create pressures on international reserves.
 
As regards IMF Precautionary Credit Loan, McGrew pointed out that discussions were good, however, it is for the Government to decide whether it will use the funds.
 
As he explained, such credit line has different conditionalities compared to a Stand-By Arrangement, since it is intended to give insurance for the country and greater confidence in case of external risks.
According to McGrew, such an instrument is valuable, since it provides for insurance in dealing with the uncertainties and assurance as regards budget execution and meeting budget policy.
 
Such insurance and confidence in economic policies will contribute to reducing costs and enhancing the possibility for the country to finance deficit, IMF Chief of Mission underlined, adding that funds under such credit loan can be used for variety of purposes, as the Government would decide. Such credit line is approved for up to 2 years, having reviews each six months assessing whether standards of country’s policies are met and whether economic policies implemented by the country correspond to the present conditions, and depending on such reviews, the credit loan is renewed.
Vice Prime Minister said that the Government has not decided on this issue yet. It will carry out consultations with the representatives of the political parties in the Parliament, followed by a decision on whether to use funds under Precautionary Credit Loan.
The Minister stressed that two-week discussions were a verification of the economic policies that are adequate and appropriate to the conditions we live in, as well as a verification that we can expect for a more evident recovery of the Macedonian economy.
 
– Several indicators were pointed out, such as that we can expect for continued growth in exports next year, with respect to consumption, above all stabilization of the consumption on the basis of solid liquidity of the banks, coordination between the fiscal and the monetary policy as regards interest rates, growth deposits and high amount of remittances, Minister Stavreski pointed out, adding that favourable trends in investments are expected to continue, to be supported by capital investments this year, in particular in 2011. Capital Investments are projected at a very high level and, coupled with the revival of the private investment activity, they will contribute to realization of the projected growth of around 3.5%.
 
Both the Government and the Ministry, as he said, find it important that the overall fiscal policy is assessed as appropriate and quality for this period, with a fiscal deficit of 2.5%, thus, as being said, two goals are met: supporting the economic activity in this post-crisis period and keeping low level of debt, i.e. not leading to higher indebtedness.
 
– Our mid-term plans overlap with what McGrew said on gradual reduction of the budget deficit over the medium term, Finance Minister said.
 
Governor Gosev expressed the contentment that assessments on the Macedonian economy are almost identical and, depending on the global economy, we can expect for the Macedonian economy to intensify soon.
With respect to the monetary policy, he underlined, that NBRM continues with its standard approach as regards stable exchange rate and subdued inflation, as well as seeking possibilities to help the credit growth which is expected.(MIA)
