Macedonia’s central bank keeps 2014, 2015 GDP growth forecast at 3.7%, 4.4%

By bne IntelliNews May 16, 2014

Macedonia's central bank said it expects the country's economy to grow 3.7% in 2014 and 4.4% in 2015, keeping its forecast unchanged from the previous one made in October 2013. The bank's projections are more optimistic than the most recent forecasts of the EBRD, the European Commission and the IMF.

Real GDP growth in Macedonia, %      
  2013 2014f 2015f
Central bank, April 2014 3.1 3.7 4.4
EBRD, May 2014 3.1 3.0 2.5
European Commission, May 2014 3.1 3.0 3.2
IMF, April 2014 3.1 3.2 3.4
Source: IMF, EC, EBRD, NBRM      

Macedonia's central bank expects growth to be driven by exports and domestic demand (investments and household consumption). At the same time, it also expects strong import growth in both years, to be driven by investments and increased consumption, as well as by the growth in exports, which have a high import content. Hence, net exports are expected to have a negative contribution to growth.

The bank predicts the current account deficit to widen from 1.9% of GDP in 2013 to 4% of GDP in 2014 and 5.8% of GDP in 2015.

It has significantly reduced its forecast for the 2014 average inflation in Macedonia, to just 1% from 2.3% expected in October 2013. The downward revision reflects supply side factors. Moreover, the institution comments that the downward risks are more pronounced this year. At the same time, it has kept is inflation forecast for 2015 at about 2%.

The central bank also noted that loan growth has accelerated to 7.5% y/y in March 2014. It expects annual loan growth to be in the range of 7%-8% in 2014 and 2015, supported by stable funding reflected in the growth of deposits and the available foreign credit lines, improved risk perceptions, and improved global environment. The monetary authority also noted that the banking system’s capital adequacy ratio remained high at 16.8% in December. The sector’s liquidity also stayed high and the share of non-performing loans fell to 11.1% in March 2014 from 11.5% at end-December 2013.

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