Central bank says GDP gets downward revision, gov’t projects 2.9% growth and 7.1% inflation
Skopje, 24 November 2022 (MIA) – The National Bank has revised downwards its spring projections. It forecasts lower economic growth, which according to basic scenario, would stand at 2.3 percent this year, i.e. 2.6 percent next year. On the other hand, according to a second scenario, growth would reach around two percent this year, and up to 1.8 percent the next. At the same time, debate on the 2023 draft budget started on Wednesday. Under the 2023 budget the government highlights maintenance of economic growth at a level of 2.9 percent.
The central bank’s autumn projections show that inflation will reach a level of 14.3 percent by the end of 2022, and a gradual slowdown to a level of 8 to 9 percent is expected in 2023. In the medium term, inflation will moderate to 2.4 percent in 2024 and 2 percent in 2025. The central bank doesn’t expect a quarterly decline in the economy.
The inflation forecasted by the government under the draft budget moves approximately within these limits, where it is at a level of 7.1 percent.
The National Bank stressed that risks in terms of growth remain downward and will largely depend on the movements in European economy.
“Risks in terms of forecasts are assessed as markedly downward and are related to the external environment, particularly the course of the war in Ukraine and implications on the global markets, on primary products and on the growth of the European economy. This uncertain global context further highlights the need for prudent domestic policies,” National Bank Governor Anita Angelovska-Bezhoska told a press conference on Wednesday.
According to Angelovska-Bezhoska, the difference in the inflation in North Macedonia and that in the countries of the European Union is due to several factors, including the greater import dependence of the country’s economy, particularly energy, as well as the greater share of food and energy in the consumption basket.
“Our import dependence and the degree of trade openness of our economy is significantly higher compared to the European Union. In our country, trade openness is 140 percent of GDP, and in the EU it is 70 percent. The second important factor is high import dependence in the energy sector, and our economy is more energy intensive compared to the European one. The third significant factor is the consumption basket, i.e. food and energy account for about 50 percent in our country, and about 30 percent in the EU. Hence, it is clear that the same global shock affects all economies, but the intensity with which it affects them depends on a number of domestic factors,” Angelovska-Bezhoska pointed out.
The central bank’s management said the denar will remain stable, as seen by the high level of foreign exchange reserves, which are currently at the level of 3.7 billion, and expected to continue to grow.
In addition, debate on the 2023 draft budget started Wednesday in Parliament. Finance Minister Fatmir Besimi highlighted that mitigating of the energy crisis impact and rising inflation, continuing fiscal consolidation and strengthening fiscal sustainability, ensuring conditions for economic recovery and sustainable economic growth, as well as uninterrupted financing of the basic functions of the state and support for judicial reforms and Euro-Atlantic integration are the four basic goals of the draft budget.
The 2023 draft budget projects economic growth of 2.9 percent. The inflation rate is expected to gradually stabilize and is projected at 7.1 percent. Total revenues in the draft budget are planned at a level of Mden 282 billion and are 14.8 percent higher compared to 2022, whereas expenditures are at a level of Mden 324.8 billion, i.e. 12.6 percent higher compared to 2022. The budget deficit is at a level of 4.6 percent of the planned GDP.
Minister Besimi also noted that by the end of the year, the public debt will not even reach 60 percent of GDP.
“The preliminary projections are that the public debt will be 58.5 percent by the end of the year,” Besimi said Wednesday before the Parliament’s Finance and Budget Committee.
According to the opposition, on the other hand, the draft budget is historically the highest, unrealistic and inflationary.
“We have historically the highest inflation, the highest public debt, enormous prices of basic food products, triple-digit fuel prices, electricity price that goes up every six months, the lowest wages in the region, the lowest economic growth, poverty, hopelessness and despair. We are a country whose households can only afford one meal a day and we rank second according to the misery index in Europe,” Bojan Stojanovski, chair of the Parliament’s Finance and Budget Committee said Wednesday.
The debate on the 2023 draft budget is to last for ten days, while the whole procedure for adopting the budget is expected to be completed by mid-December.
