Transcript Slide 1

Maintaining Macroeconomic
Stability in Turbulent Times:
The Case of Macedonia
Dimitar Bogov
Governor
National Bank of the Republic of Macedonia
Macedonia was one of the countries in
Europe with the lowest fall in output in
2009...
GDP (y-o-y, %)
8.0
6.0
4.0
Serbia
2.0
Croatia
0.0
Bulgaria
Greece
-2.0
Albania
-4.0
B&H
-6.0
Macedonia
-8.0
2008
2009
2010
Source: IMF, World Economic Outlook database , Euro stat and NBRM projections
2011
2012
... economy had recovered after the negative impact of the
global financial crisis, but economic downturn and
financial stress in the euro area poses risks to the
growth...
GDP (y-o-y, %)
7.0
6.1
6.0
5.0
4.6
4.0
5.0
5.0
4.4
3.3
3.0
2.4
2.0
1.8
1.0
0.0
-0.9
-1.0
-2.0
2004
2005
2006
Source: State Statistical Office and NBRM projections
2007
2008
2009
2010
2011
2012
In 2011 the surge in investments and private
consumption were main growth drivers;
2012 growth is expected to driven predominantly by
investments...
14.0
Contributions to GDP growth (p.p.)
Gross investments
12.0
Government consumption
10.0
Private consumption
8.0
Net exports
6.0
4.0
2.0
0.0
-2.0
-4.0
-6.0
2004
2005
2006
Source: State Statistical Office and NBRM projections
2007
2008
2009
2010
2011
2012
Inflation is expected to decline to 2 percent in
2012, as the effects of higher food and commodity
prices fade and in response to slowing demand
14.0
12.0
10.0
Serbia
8.0
Croatia
6.0
Albania
4.0
B&H
2.0
Kosovo
0.0
2006
2007
2008
2009
-2.0
-4.0
Source: IMF, World Economic Outlook database and NBRM projections
2010
2011
2012
Macedonia
Policy rate (Central Bank Bills rate- CB-Bills) is
remaining unchanged, at the historically low level
of 4%
CB-Bills interest rate
10.0
%
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
2006
Source: NBRM
2007
2008
2009
2010
2011
2012
In the post-crisis period, there is an evident
external imbalances correction...
Current Account Balance (% of GDP)
2008
2009
2010
2011
5.0
0.0
-2.2
-5.0
Serbia
Croatia
-6.8
-10.0
-15.0
-2.8
Bulgaria
Greece
-12.8
Albania
B&H
Kosovo
-20.0
-25.0
-30.0
Source: IMF, World Economic Outlook database and NBRM
Macedonia
...the trade deficit is almost fully financed by the
strong private transfers inflows (net-foreign
currency purchases by exchange offices) and
improved service balance ...
% of GDP
35.0
25.0
15.0
Transfers, net
5.0
Income, net
Services balance
-5.0
Trade balance
Current account (% GDP)
-15.0
-25.0
-35.0
2004
Source: NBRM
2005
2006
2007
2008
2009
2010
2011
2012
Trade deficit is largely due to energy
dependence and imports by investment
Non-energy trade balance (% of
GDP)
Energy trade balance (% of GDP)
5.0
Trade Balance by determinants (% GDP)
0.0
0.0
-5.0
-5.0
-10.0
-10.0
-15.0
-15.0
-20.0
-20.0
Investment
Industry
Consumption
-25.0
-25.0
-30.0
-30.0
2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: NBRM
2004
2005
Source: NBRM
2006
2007
2008
2009
2010
2011
Some positive trends are evident in the export
structure; the capacity of the economy is increased with
the FDIs and there is a trend of geographical diversification
of export
Exports to top 10 countries (share
in total %)
1.4
Exports by SITC (share in total
Other %)
Belgium
Bosnia and
Herzegovina
Miscellaneous manufactured articles
Machinery and transport equipment
Manufactured goods classified by
materials
Chemical Products
2011
2006
Mineral fuels, lubricants and related
materials
China
2.9
Croatia
3.1
6.5
Italy
2006
7.5
6.9
Bulgaria
Beverages and tobacco
12.1
Kosovo
Food and live animals
2011
4.8
Greece
Serbia
Crude materials, inedible, except
fuels
27.9
Germany
0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0
Source: State Statistical Office
2.1
0.0
Source: State Statistical Office
10.0
20.0
30.0
After the external shock to FDIs these inflows were
recovered and with the modest external debt rise
contributed for Gross Reserves increase
14.0
FDIs (% GDP)
Capital and financial account net
inflows (% GDP)
12.0
10.0
8.5
8.0
6.6
6.0
6.1
5.9
4.1
4.0
2.0
1.6
2.0
2.3
0.0
2004
Source: NBRM
2005
2006
2007
2008
2009
2010
2011
The level of Gross Reserves is adequate
and protects the exchange rate peg...
million Euros
Gross Reserves (mill.euros)
Gross Reserves (% GDP)
% GDP
30.0
2,000.0
25.0
1,500.0
20.0
15.0
1,000.0
10.0
500.0
5.0
0.0
I.2008
Source: NBRM
0.0
I.2009
I.2010
I.2011
I.2012
... sustainability and vulnerability indicators
don't show some imbalances...
Reserves to imports
Reserves to short-term
external debt
5.0
4.5
2.5
4.0
3.5
2.0
3.0
1.5
2.5
2.0
1.0
1.5
0.5
1.0
0.5
0.0
2004
2005
2006
2007
2008
2009
2010
2011
0.0
2004
Private external debt to
GDP
2005
2006
2007 2008
2009
2010
2011
Gross external debt to
exports
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
160.0
140.0
120.0
100.0
80.0
60.0
40.0
2004
Source: NBRM
2005
2006
2007
2008
2009
2010
2011
20.0
0.0
2004
2005
2006
2007
2008
2009
2010
2011
... the low level of sovereign external debt in the
years before the crisis was significant buffer and the
higher share of long-term debt, protects the country
from capital flights
Short-term external debt to gross external debt
(%)
Private sector external debt to GDP (%)
Public sector external debt to GDP (%)
Gross External Debt to GDP (%)
65.0
63.3
Medium/long-term external debt to gross
100 external debt (%)
90
55.0
31.5
80
45.0
39.0
70
60
35.0
50
40
25.0
68.5
30
15.0
24.3
20
10
5.0
0
-5.0
2004 2005 2006 2007 2008 2009 2010
Source: NBRM
Q1
Q2
Q3
2011 2011 2011
2004 2005 2006 2007 2008 2009 2010
Source: NBRM
Q1
Q2
Q3
2011 2011 2011
Government has built significant fiscal buffers
before the crisis; balanced budget and low level of
public debt...
45.0
Central government (CG) fiscal
balance in % of GDP
External (% GDP)
40.0
1.0
0.0
Domestic (% GDP)
0.0
35.0
0.6
0.2
-0.5
CG debt ( % of GDP)
30.0
-0.9
-1.0
-2.7
-2.5
-2.6
25.0
6.8
20.0
-2.0
15.0
-3.0
21.4
10.0
-4.0
5.0
-5.0
2004 2005 2006 2007 2008 2009 2010 2011
Source: Ministry of Finance
0.0
2004 2005 2006 2007 2008 2009 2010 2011
Source: Ministry of Finance
Macedonia is one of the countries with
lowest deficit and public debt
4.0
Budget Balance (% GDP)
70.0
Public Debt (% GDP)
60.0
2.0
Serbia
Croatia
50.0
0.0
Bulgaria
Albania
40.0
-2.0
B&H
30.0
Macedonia
-4.0
20.0
-6.0
10.0
-8.0
2008
2009
2010
2011
Source: IMF , Country Reports and Ministry of Finance , RM
0.0
2008
2009
2010
2011
Financial sector indicators continue to suggest
sound overall conditions; the capital adequacy
ratio is high and liquidity risk is low
30.0
25.0
Regulatory capital/risk weighted
assets (%)
Highly liquid assets/total assets
Tier I capital/risk weighted assets
(%)
30.0
25.3
25.0
20.0
16.8
14.1
15.0
20.0
15.8
15.0
10.0
10.0
5.0
5.0
2004
2005
2006Q1
2006Q2
2006Q3
2006Q4
2007Q1
2007Q2
2007Q3
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
2011Q4
0.0
0.0
2004 2005 2006 2007 2008 2009 2010 2011
Source: NBRM
Source: NBRM
NPLs rose, but remain below their post-crisis peak
(10.4%) and are fully covered by bank provisions
Provisions to NonPerforming Loans (%)
NPLs / Gross loans (%)
18.0
16.0
140.0
14.0
120.0
12.0
104.0
100.0
10.4
10.0
9.5
8.0
6.5
6.0
80.0
60.0
4.0
40.0
2.0
20.0
Source: NBRM
2011Q4
2011Q3
2011Q2
2011Q1
2010Q4
2010Q3
2010Q2
2010Q1
2009Q4
2009Q3
2009Q2
2009Q1
2008Q4
2008Q3
2008Q2
2008Q1
2007Q4
2007Q3
2007Q2
2007Q1
2006Q4
2006Q3
2006Q2
2005
2006Q1
2004
0.0
0.0
2004
2005
Source: NBRM
2006
2007
2008
2009
2010
2011
Loans continue to be financed predominantly by
local deposits (loan-to-deposits ratio is 0.89),
with limited reliance on external financing
55.0
50.0
45.0
49.9
120.0
46.1
100.0
40.0
80.0
35.0
60.0
Deposits of other sectors at
banks, % of GDP
30.0
20.0
Oct-11
Jul-11
Apr-11
Jan-11
Oct-10
Jul-10
Apr-10
Jan-10
Jul-09
Oct-09
Apr-09
Jan-09
Oct-08
Jul-08
Apr-08
Jan-08
Oct-07
Jul-07
Apr-07
Jan-07
Source: NBRM
89.0
40.0
Banks claims on other sectors,
% of GDP
25.0
20.0
Banks claims on other sectors/
Deposits of other sectors at banks
0.0
2004
2005
Source: NBRM
2006
2007
2008
2009
2010
2011
Private sector is not heavily indebted, but there is a
significant currency mismatch of the non-banking sector
(short FX position by the companies and long FX position
by households)
50.0
Claims on enterprises in % of
GDP
Claims on households in % of
GDP
15.0
12.0
12.4
10.3
Banks FX and FX
indexed claims
on households household FX
and FX indexed
deposits, % of
GDP
10.0
45.0
40.0
5.0
35.0
27.8
30.0
24.9
0.0
25.0
-5.0
20.0
15.0
-10.0
10.0
18.2
16.9
-12.2
5.0
-15.0
2009
0.0
2004
Source: NBRM
2005
2006
2007
2008
2009
2010
2011
Source: NBRM
-12.8
2010
-12.3
2011
Banks FX and FX
indexed claims
on enterprises enterprise FX
and FX indexed
deposits, % of
GDP
Banks interest rate margin is increasing
recently
8.0
Banks Denar interest rate margin (average
for the year)
Banks Foreign currency interest rate
margin (average for the year)
Interest rate differential between NBRM
CB-Bills and ECB policy rate (end of
period)
8.0
7.0
7.0
6.0
6.0
5.0
4.7
4.0
5.0
4.0
3.0
3.0
3.0
2.0
2.0
1.0
1.0
3.0
0.0
0.0
2005
Source: NBRM
2006
2007
2008
2009
2010
2011
2005
Source: NBRM
2006
2007
2008
2009
2010
2011
Summary:
Macedonian economy is more
resilient now then in 2009 crisis;
 GDP growth is supported by FDIs and government
investment;
 Inflation is on declining path;
 The EU crisis imposes risks to exports, but more
diversified structure is a buffer for adjustment in a
case of potential external shocks;
 Banking system remains sound, with higher capitaladequacy ratios and liquidity ratios;
 The public debt is sustainable;
 Foreign reserves are at an adequate level.
Appendix:
Macro prudential Indicators –Regional
Comparison
25.0
Regulatory capital to risk-weighted assets (%)
B&H
20.0
16.8
16.2
Serbia
Bulgaria
15.0
Albania
Croatia
10.0
Tukey
Montenegro
5.0
RM
0.0
2008
Source: National Central Banks official web sites
2009
2010
Q3 2011
25.0
Nonperforming loans (NPLs) to total loans (%)
B&H
20.0
Serbia
Bulgaria
15.0
Albania
9.5
10.0
Croatia
Tukey
6.7
Montenegro
5.0
RM
0.0
2008
Source: National Central Banks official web sites
2009
2010
Q3 2011
4.0
Return on assets (ROA, %)
3.0
B&H
2.0
Serbia
1.4
1.0
0.7
Bulgaria
Albania
0.0
2008
2009
2010
Q3 2011
Croatia
-1.0
Tukey
-2.0
-3.0
-4.0
Source: National Central Banks official web sites
Montenegro
RM
70.0
Liquidity ratio (liquid assets to total assets)
60.0
B&H
Serbia
50.0
Bulgaria
40.0
Albania
31.3
30.0
Croatia
22.9
Tukey
20.0
Montenegro
10.0
RM
0.0
2008
Source: National Central Banks official web sites
2009
2010
Q3 2011