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Macroeconomic Indicators and Financial Sector Developments in the Recent Crisis Environment -The Case of the Republic of Macedonia-. Dimitar Bogov Vice Governor. April, 2010. Content. Macedonian economy before Lehman bankruptcy Transmission channels of the world economic crisis - PowerPoint PPT Presentation
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Macroeconomic Indicators and Macroeconomic Indicators and Financial Sector Developments in the Financial Sector Developments in the
Recent Crisis EnvironmentRecent Crisis Environment-The Case of the Republic of -The Case of the Republic of
Macedonia-Macedonia-
Dimitar BogovDimitar BogovVice GovernorVice Governor
April, 2010
NBRMNBRMNBRMNational Bank of the Republic of MacedoniaNBRMNBRMNBRM
ContentMacedonian economy before Lehman
bankruptcyTransmission channels of the world
economic crisisPolicy responsesBanking sector developmentsThe latest developments
NBRMNBRMNBRMNational Bank of the Republic of MacedoniaNBRMNBRMNBRM
Before “Lehman”, Macedonian economy was booming,but,imbalances were building up
NBRMNBRMNBRMNational Bank of the Republic of MacedoniaNBRMNBRMNBRM
High economic growth...
0.01.02.03.04.05.06.07.08.0
2005
:Q1
2005
:Q2
2005
:Q3
2005
:Q4
2006
:Q1
2006
:Q2
2006
:Q3
2006
:Q4
2007
:Q1
2007
:Q2
2007
:Q3
2007
:Q4
2008
:Q1
2008
:Q2
2008
:Q3
(real GDP growth rates -yoy)
NBRMNBRMNBRMNational Bank of the Republic of MacedoniaNBRMNBRMNBRM
...driven by domestic demand...
-15
-10
-5
0
5
10
15
20
2007:Q1 2007:Q2 2007:Q3 2007:Q4 2008:Q1 2008:Q2 2008:Q3
domestic demand
net exports
contribution to grow th
NBRMNBRMNBRMNational Bank of the Republic of MacedoniaNBRMNBRMNBRM
...which was fueled by credits to the private sector...
20.0
30.0
40.0
50.0
60.0
2007
:12
2008
:01
2008
:02
2008
:03
2008
:04
2008
:05
2008
:06
2008
:07
2008
:08
2008
:09
retail corporate total
growth rate (yoy)
NBRMNBRMNBRMNational Bank of the Republic of MacedoniaNBRMNBRMNBRM
…and procyclical fiscal policy...
23,000
25,000
27,000
29,000
31,000
33,000
35,000
2006
:Q1
2006
:Q2
2006
:Q3
2006
:Q4
2007
:Q1
2007
:Q2
2007
:Q3
2007
:Q4
2008
:Q1
2008
:Q2
2008
:Q3
trendline of expenditures
trendline of revenues
NBRMNBRMNBRMNational Bank of the Republic of MacedoniaNBRMNBRMNBRM
... led to deepening current account deficit...
-14.0
-12.0
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2005 2006 2007 2008
CAB as % of GDP
NBRMNBRMNBRMNational Bank of the Republic of MacedoniaNBRMNBRMNBRM
…but, ROW was willing to finance it
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
2005
2006
2007
2008
Reserves
Other investments
FDI & PI
Current account
as % of GDP
NBRMNBRMNBRMNational Bank of the Republic of MacedoniaNBRMNBRMNBRM
Then, it happened “Lehman”
NBRMNBRMNBRMNational Bank of the Republic of MacedoniaNBRMNBRMNBRM
Export fell down...
-40.0
-20.0
0.0
20.0
40.0
60.0
80.0
Q1/
06
Q2/
06
Q3/
06
Q4/
06
Q1/
07
Q2/
07
Q3/
07
Q4/
07
Q1/
08
Q2/
08
Q3/
08
Q4/
08
Q1/
09
Q2/
09
Q3/
09
export import
growth rate (yoy)
NBRMNBRMNBRMNational Bank of the Republic of MacedoniaNBRMNBRMNBRM
…dragging down industrial production too...
-15
-10
-5
0
5
10
15
2006
:Q1
2006
:Q2
2006
:Q3
2006
:Q4
2007
:Q1
2007
:Q2
2007
:Q3
2007
:Q4
2008
:Q1
2008
:Q2
2008
:Q3
2008
:Q4
2009
:Q1
2009
:Q2
2009
:Q3
growth rate (yoy)
NBRMNBRMNBRMNational Bank of the Republic of MacedoniaNBRMNBRMNBRM
…however, domestic demand continued to grow...
-202468
101214161820
2007:Q1 2007:Q2 2007:Q3 2007:Q4 2008:Q1 2008:Q2 2008:Q3 2008:Q4 2009:Q1
co
NBRMNBRMNBRMNational Bank of the Republic of MacedoniaNBRMNBRMNBRM
…but, ROW was not willing to finance it anymore...
-500-400-300-200-100
0100200300400500
2008
:Q4
2009
:Q1
Reserves
Other investments
FDI & PI
Current account
in EUR mi l l ions
NBRMNBRMNBRMNational Bank of the Republic of MacedoniaNBRMNBRMNBRM
…so, the bill had to be paid by foreign reserves...
0200400600800
10001200140016001800
2006
:120
06:3
2006
:520
06:7
2006
:920
06:1
120
07:1
2007
:320
07:5
2007
:720
07:9
2007
:11
2008
:01
2008
:03
2008
:05
2008
:07
2008
:09
2008
:11
2009
:01
2009
:03
-200-150-100-50050100150200
monthly change (rhs) stock of f/x reserves (lhs)
EUR mi l l . EUR mi l l .
NBRMNBRMNBRMNational Bank of the Republic of MacedoniaNBRMNBRMNBRM
... putting pressure on the exchange rate peg
6161.05
61.161.15
61.261.25
61.361.35
61.461.45
01.01.20
08
01.02.20
08
01.03.20
08
01.04.20
08
01.05.20
08
01.06.20
08
01.07.20
08
01.08.20
08
01.09.20
08
01.10.20
08
01.11.20
08
01.12.20
08
01.01.20
09
01.02.20
09
01.03.20
09
MKD/EUR
NBRMNBRMNBRMNational Bank of the Republic of MacedoniaNBRMNBRMNBRM
Policy responses - monetaryPrudential measures (December 2008)
Policy rate increase from 7% to 9% (March 2009)
Increase of reserve requirements for f/x deposits from 10% to 13% (May 2009)
NBRMNBRMNBRMNational Bank of the Republic of MacedoniaNBRMNBRMNBRM
Policy responses - fiscalCut of discretionary expenditures in order
to meet the deficit target of 2.8% (June and September 2009)
Issue of external debt (July 2009)
NBRMNBRMNBRMNational Bank of the Republic of MacedoniaNBRMNBRMNBRM
-500-400-300-200-100
0100200300400500
2007
:Q1
2007
:Q2
2007
:Q3
2007
:Q4
2008
:Q1
2008
:Q2
2008
:Q3
2008
:Q4
2009
:Q1
2009
:Q2
2009
:Q3
2009
:Q4
Reserves
Other investments
FDI & PI
Current account
EUR mi l l .As a result, CAD was reduced...
NBRMNBRMNBRMNational Bank of the Republic of MacedoniaNBRMNBRMNBRM
...and exchange rate stabilised
6161.05
61.161.15
61.261.25
61.361.35
61.461.45
01.0
1.20
08
01.0
3.20
08
01.0
5.20
08
01.0
7.20
08
01.0
9.20
08
01.1
1.20
08
01.0
1.20
09
01.0
3.20
09
01.0
5.20
09
01.0
7.20
09
01.0
9.20
09
NBRMNBRMNBRMNational Bank of the Republic of MacedoniaNBRMNBRMNBRM
Financial stability indicators
NBRMNBRMNBRMNational Bank of the Republic of MacedoniaNBRMNBRMNBRM
Latest developments Export is picking up Import is still declining Weak domestic demand Industrial production is volatile Fiscal revenues are still weak Stable foreign exchange market Deposits growth rate is improving Credit growth rate still weak but positive
NBRMNBRMNBRMNational Bank of the Republic of MacedoniaNBRMNBRMNBRM
Thank you for the attention