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
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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.