Central banks or their government shareholders enjoy a steady stream of profit from the issue of currency in the form of notes and coin - the so-called seignorage. It is noteworthy that the public’s demand for currency has been much less affected over the years than one might have expected by the emergence of successive new forms of non-cash payment such as cheques and cards. And personally I would doubt whether the development of cyberpurses, cybercash and cyberpayments would have much impact on cash in circulation, at any rate in the near term. But suppose I am wrong. Suppose there is a complete revolution such that cybercash, including electronic stored-value cards, substantially displaces physical currency within a few years. How should central banks react? In such circumstances, central banks would lose an important source of income and would have to find ways of replacing it. Perhaps some central banks would lose their financial independence and become dependent - or more so than hitherto - on subvention from the government budget. But in a broader sense they should welcome the development because it would be evidence that the economy as a whole was enjoying a more efficient and less expensive means of money holding and transmission.
Of course, last year the fall in the oil prices was also beneficial for the trade balance. On the financing side, the financial flows were large enough to cover the current account deficit and to provide additional reserve accumulation. It is important to note that FDI inflows continued to flow in the economy, with their ratio to GDP being kept stable at 3.3% of GDP. Yet, the largest part of the financing flows came through the government borrowing at the international market, at rather favorable terms, pinpointing the perception of the investors for sound fundamentals and rather prudent policies in the Macedonian economy. Observing the inflation path, it more or less resembled the inflation pattern elsewhere, with the falling food and energy prices pushing prices down. The average headline rate for 2014 was mildly negative (–0.3%), while the core inflation albeit slowing down, on average remained positive. The inflation adjustment is perceived as temporary, driven by supply-side factors, and without any risks to become entrenched in the inflation expectations and to jeopardize the  BIS central bankers’ speeches  1  economic recovery. The fact that the negative output gap has been narrowing and the fall of the prices has been significantly slowing down in the first months of this year, just support the former notion. Domestic financing through the banking sector significantly increased in 2014, with credit market recovering much faster compared to the previous years.