Nevertheless, having in mind the potential implications from the credit growth, it is necessary to strengthen the capacity of the banks to assess adequately the credit risk, as well as to monitor the quality of the credit portfolio through the NBRM's banking supervision. 3. Danger of real appreciation of the currency, encouraged by: potential capital inflows, expected productivity increase in the sector of tradables in the process of approaching the developed economies (appearance of the Balassa Samuelson effect also in the Macedonian economy) as well as completion of the process of price deregulation. Real depreciation of the exchange rate registered so far distinguishes the Republic of Macedonia as a specific example in comparison to almost all the countries in transition. To a high extent such performances are due to the improved competitiveness of the Macedonian economy as a result of the relatively lower rate of inflation compared to the trading partners, given the higher productivity achieved in the non-tradables sector, and the higher new value added that was significantly influenced by the relatively lower number of employed persons. In 2005, this trend experienced a change (which was expected) shown by achieving higher growth rate of productivity in the sector of tradables compared to the sector of non-tradable products. Such changes indicated the beginning of the process of exchange rate appreciation that is actually recorded in the course of 2006 (primarily caused by the higher domestic prices, mainly because of the higher additional duties on tobacco.
Consistent macroeconomic policies, confidence in the Denar and increased competition in the banking system had to cause easing of the monetary policy and lower interest rates in the economy. The expectations for maintaining the current direction of the Macedonian economy, the firm stance of the Government of the Republic of Macedonia for continuation and intensification of the structural reforms, the realistic expectations for achieving faster growth and the expectations for setting a date for the Republic of Macedonia to start negotiations for getting the status of a member of the European Union, then, intensification of the process of liberalization of the capital flows in 2008, as well as the larger financial integration of the European capital markets through issuance of Eurobonds, definitely build a foundation of realistic expectations for much higher capital inflows in the forthcoming period. 3  BIS Working Party on Monetary Policy in Central and Eastern Europe, 21-22 February 2005, Sinaia, Romania. 4  Buiter W.H. and Grafe C., "Anchor, Float, or Abandon Ship: Exchange rate regimes for the Accession Countries", European Investment Bank Papers, 7 (2), 2001. 2  BIS Review 100/2006  These expectations are supported also by the positive interest differential and attractiveness of the securities that are listed on the domestic securities market. Under such circumstances, key challenges of the monetary policy, in the context of the capital account liberalization and potential risks for deepening of the current account deficit in the Republic of Macedonia, are the following: 1.