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Quarterly revision of the macroeconomic projections Quarterly revision of the macroeconomic projections

Quarterly revision of the macroeconomic projections - PowerPoint Presentation

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Quarterly revision of the macroeconomic projections - PPT Presentation

Governor Dimitar Bogov August 201 2 CONTENTS Macroeconomic projections for 2012 and 2013 Assumptions from the external environment Basic macroeconomic scenario for 2012 ID: 399645

2013 2012 prices foreign 2012 2013 foreign prices projection macroeconomic revision inflation demand risks moderate pressures downward compared capital investments inflows rate

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Slide1

Quarterly revision of the macroeconomic projections

GovernorDimitar Bogov

August, 2012 Slide2

CONTENTSMacroeconomic projections for

2012 and 2013 Assumptions from the external environment

Basic macroeconomic scenario for 2012 and 2013 Comparison with the previous projection

Projection risks

Effects on the monetary policySlide3

Macroeconomic projections for

2012 and 2013 external assumptions

During the last three months, the risks on the financial markets and the problems with the debt crisis in the Euro area increased again

;

The economic prospects for the global economy deteriorated again, emphasizing the downward risks related to the projections

;

New deterioration in the forecasts for the economic performances

of the most important trading partners of the Macedonia,

in comparison with the preceding projection;The foreign demand trajectory for Macedonian products remains the same as in the previous projection – decrease in 2012 and moderate rise in 2013, but now with severer drop in 2012 and smaller rise in 2013. Slide4

Foreign effective demandSlide5

Foreign effective inflation

The foreign effective inflation is lower compared to the expectations

estimates for smaller pressures on the domestic prices through the foreign inflation in 2012 compared to the preceding projection

;

Moderate acceleration in

2013,

on the backdrop of

demand

recovery and possible pressures of the food prices – upward revision of the foreign effective inflation for 2013 compared to the previous projection. Slide6

Commodity pricesThe expectations for worse economic performances create downward pressures on part of the export and import prices;

Downward revision of oil and metal prices relative to the previous projection;Estimations for decrease in the metal prices in 2012 and their stabilization in

2013;The oil prices dynamics in 2012 is upwards – the price level is expected to decrease in

2013;

Large upward correction with the food prices, compared to the preceding projection, because of the negative shock on the supply side

.

Slide7

Commodity pricesSlide8

Foreign interest rate

Further decrease in the Euribor, in conditions of threats for new recession in the Euro area;

Decrease in the ECB interest rate in July 2012;

Downward revision of the foreign interest rate relative to the preceding projection;

Expectations for slight increase in the following period, caused by the possible inflationary pressures arising from the monetary loosening undertaken so far

.Slide9

Macroeconomic projections

for 2012 and 2013 GDP

Downward revision of the foreign demand and poor performances in the first quarter of the year

;

Downward revision of the GDP projection in 2012 from

2%

to about

1%;Gradual recovery in 2013 (increase of

3%, compared to

3

.

7% in April projection), underpinned by the improved environment, structural changes and government investments.Slide10

Macroeconomic projections for 2012 and 2013

GDP

Reduced activity of the export sector in

2012

and recovery in

2013,

given anticipated large effect of the new capacities activity on the export potential

;

Moderate domestic demand in

2012

and strengthening in 2013, backed by the announced foreign investments and public investments;Reduced import pressures in 2012 and their new intensification in 2013, in line with the intensified domestic demand.Slide11

Macroeconomic projectionsfor

2012 and 2013 balance of payments’ current account

High increase in the inflows from the currency exchange market in the first half of

2012 (48%

annually) – high confidence in the domestic currency

;

Estimates for gradual private transfers deceleration until the end of 2

012 and 2013;

Stable trade deficit in 2012

and moderate narrowing in 2

013;

Minor movements of the current account deficit in 2012 and 2013. Slide12

Macroeconomic projections

for 2012 and 2013 capital inflows

Downward revision of the capital inflows in 2012,

given lower debt-creating inflows and lower foreign investments;

Similar level of capital inflows also in

2013,

given net repayments of government debt and higher foreign direct investments

;Moderate increase in the foreign reserves in 2012 and

2013 and their maintenance around the adequate level

. Slide13

Macroeconomic projections

for 2012 and 2013 inflation

The average inflation rate in the first half of

2012

is

2

.

3%;The average inflation in 2012 and 2013 is expected to gravitate around 2.

2%;

Absence of demand pressures

prolonged closure of the negative output gap to the middle of 2014;Upward pressures of the oil prices in 2012 and their depletion in 2013;The world food prices move upwards in 2012 and 2013, because of the supply shock;Effect of the increase in the regulated prices on the general price level.Slide14

Macroeconomic projections

for 2012 and 2013 credit growth

The credit support in the first half

2012

is larger than expected

(7

.

5%

annually

,

compared to

6.6%), given relaxed monetary conditions and relatively stable risk perceptions by the banks;Moderate upward revision of the credit growth to 8% in 2012 and about 10% in 2013, given further deposit growth and disposable foreign sources of funding;The banking system continues registering high capital adequacy ratio (17.5%

),

high liquidity and relatively stable share of the nonperforming placements

(9

.

9%)

in the first quarter of

2012.Slide15

Comparison with the previous projectionSlide16

Projection risks

The projection assumes short-term effects of the deteriorated global environment, which would exhaust in 2013, with certain risks:

The possible persistence or deepening of the Euro area crisis may reflect on the growth dynamics of the Macedonian economy, as well as on the capital flows dynamics

;

More apparent risks of price shocks on the supply side, with potential transmission effects on the other prices.Slide17

Effects on the monetary policy

Moderate economy growth – the economy will be below the potential in the following two years

; Instable environment and enduring risks, but with positive impulse from the new private and public investments;The inflation is within the acceptable limits, but with present upward risks;

The external position is stable, with positive effects of the new capacities, feeble domestic demand, solid private transfers and assessment for sufficient capital inflows;

The foreign reserves are around the adequate level

;

Current monetary conditions are assessed as adequate, i.e. we are retaining the same interest rate

;

The need for further regular monitoring of the economic developments, as well as timely reaction, if needed, remains.