In the following years the starting point for the monetary programme was the expected development of both real GDP and the inflation rate with the corrections for the envisaged changes in income velocity of money (in the Czech terminology the relevant aggregate M2 consists of currency and demand deposits, time and savings deposits and deposits in foreign currency). To be up-to-date, in 1997 we are targeting the increase of money supply by 8-12 per cent. The philosophy behind money supply targeting is well known. Without a deep reflection upon this theme I recall the message of famous equation of exchange: Total monetary expenditures have to increase proportionally, if the velocity is constant, to nominally expressed GDP. Nothing more and nothing less is required from monetary policy. Monetary policy should serve one goal only: to repress high inflation and provide for a stable currency. As a rule of thumb this reasoning is both understandable and acceptable but a more profound discussion must draw our attention to several points: Neglecting at this moment the different versions of the equation of exchange what can we understand under the heading “total physical volume of transactions” on the right side of this equation? For the economies in transition the difference between the total volume of transactions and transactions counted in national income accounting is important. A part of the transactions is used for intermediate-good or inter-business expenditures and is not counted in the GDP accounts.
Jointly with several countries in the region, we were positioned in the group of efficiency enhancers, meaning that reforms must be intensified to increase the growth efficiency and quality. Increasing the technological readiness was one of the identified priorities. Thus, in the last decade, the Macedonian productivity level has been staggering to around 40% of the level of advanced economies, such as German economy. This clearly points that if we want to grow at stronger pace and in a more sustainable, green and inclusive way, we need to continue intensively addressing the structural hurdles for the key long-term determinants of the growth: labour, capital and productivity. Let me focus on productivity. At this point, I think I can bring in the highlight of the latest Transition Report, i.e., innovation and digitalisation of the economies. The adoption of digital technologies can unleash productivity revival and possibly counteract some forces that act as drag on growth, such as adverse demographic and emigration trends that dampen the labour supply. What is the pace of digitalization of the Macedonian Economy? The new EBRD digitalization index points to a progress in both segments that are captured by the index – first, the preconditions for the use of digital technologies (digital infrastructure, skills, regulation, provision of government services), and second, the actual use of digital technologies by individuals and companies. The progress is particularly visible in the area of regulation and provision of government services, where score has more than doubled.