The financial flows (FDIs and borrowing of private and public sector) are projected to be sufficient to cover current account deficit and to provide some further accumulation of reserves. Thus the foreign reserves are expected to remain at comfortable level during 2013, indicating adequate capacity for maintaining the fixed exchange rate. In a medium run, we expect more positive effects of the FDI’s in the tradable sector on the exports, thus lowering the trade deficit, which is one of the main structural problems. The Macedonian banking sector has remained stable and sound despite the global financial and economic turbulences in the last few years reflecting orientation towards traditional banking activities at domestic market and stable domestic sources of financing. In May 2013, the total banks’ deposits were higher by 3.3% on annual basis, and what is very important,  BIS central bankers’ speeches  1  the trend of more pronounced growth in the Denar deposits relative to the foreign currency deposits from the previous three years continued. In May 2013, the Denar deposits were higher by 9.3%, while foreign currency deposits declined by 3.4%, on annual basis. Therefore, the level of euroization, measured through the share of foreign currency deposits in the total deposits went down from almost 55% in mid-2009 to 44% in May 2013, which is a positive indication for the confidence in the national currency and monetary policy credibility (providing more space for accommodative monetary policy).
In general, the current macroeconomic developments and the expected future outlook indicate a moderate recovery of domestic economy (considering expected developments for the economies of the most important trading partners and domestic drivers of growth), inflation rate in line with the expectations, a balance of payments position that ensures a comfortable level of foreign reserves and still slow credit flows. These assessments created an environment for monetary relaxation, as a contribution to higher credit growth and thus, support to the domestic economy. On that basis, in January, we reduced the key interest rate on CB bills from 3.75% to 3.5%, which is the historically lowest level. Since January 2013, the changes in the reserve requirement instrument came into force, through reduction of the base of banks’ reserve requirements by the amount of newly approved loans, but only for credits to sectors whose growth reduces the external vulnerability of the economy (net exporters and energy sector). This non-standard measure will be in effect until the end of 2014, when the need for further application will be examined. These changes in reserve requirements have already started to contribute to higher lending to previously mentioned sectors in the economy. Just last week, we have done yet another change in the reserve requirement by reducing the reserve requirement ratio on Denar deposits from 10% to 8% and simultaneous increase of the reserve requirement ratio on foreign currency deposits from 13% to 15%, as well as introducing 0% reserve requirement ratio on banks’ long term liabilities to nonresidents.