Statement at the End of a Staff Visit to FYR Macedonia

Press Release No. 09/170
May 15, 2009

An International Monetary Fund (IMF) team headed by Wes McGrew visited Skopje May 7-14 to assess economic and financial conditions and to discuss economic policies with the authorities. The team would like to thank the Macedonian authorities for their gracious hospitality and open discussions. At the end of the visit, Mr. McGrew issued the following statement:

“The economy is slowing sharply from the rapid pace of growth of last year. Like many other countries in the region, the global economic contraction and financial deleveraging, and the resulting shrinking demand for exports and scarcer external financing, have had a negative impact on the economy. These negative forces are likely to cause a contraction in GDP growth this year and only a gradual recovery next year, although there are uncertainties about how quickly global growth will resume.

“The economic downturn has had a negative effect on fiscal revenues. The government’s revised budget, which reduces expenditures in response to falling revenues, is a step in the right direction. If revenues fall below the revised budget revenue estimates due to contracting economic activity, additional measures would be needed to achieve the targeted fiscal deficit.

“The balance of payments is likely to be a challenging area for Macedonia this year. Declining exports and remittances make it difficult to significantly reduce the current account deficit, while at the same time foreign direct investment and other capital inflows have slowed. As world growth gradually picks up, these pressures should ease, but the authorities should be prepared to take additional measures if needed.

“The decline in inflation, from over 8 percent last year to near zero now, is a welcome development. We are also encouraged that the banking system appears to be relatively robust. Credit growth is likely to slow sharply from last year’s fast pace as banks face tighter liquidity conditions, but balance sheets appear strong enough to weather the downturn without major damage. Of course, vigilance is always needed, and the authorities should respond promptly to any problems that might arise.

“The Fund stands ready to support Macedonia in whatever way is most helpful. The Fund is willing to discuss with the authorities the provision of technical assistance, policy advice, or financial support.”



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