Via IMF (Den Internationale Valutafond)

IMF Staff Concludes Virtual Visit to North Macedonia

November 20, 2020

End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. This mission will not result in a Board discussion.

  • Economic activity is expected to rebound in 2021, after a sharp fall in 2020, but the second wave of the pandemic poses risks to the strength of the rebound.
  • Addressing the health crisis remains a top priority and will be critical for protecting people and safeguarding the economy.
  • Fiscal policy should remain supportive in the near term to protect jobs, firms, and the vulnerable, and health care spending should be prioritized.
  • Accommodative monetary policy should be maintained until the recovery is well underway. Adequate provisioning for banks’ potential losses remains essential.

Washington, DC:
An International Monetary Fund (IMF) mission, led by Bergljot Barkbu,
conducted a virtual staff visit with the authorities of North Macedonia
during November 9-18, to discuss recent economic and financial sector
developments, the 2021 budget and the outlook. At the conclusion of the
visit, Ms. Barkbu issued the following statement:

“Macroeconomic and financial stability has been maintained thanks to
skillful policy management, as well as globally accommodative financial
conditions. The timely policy actions taken by the Government and the
National Bank of the Republic of North Macedonia (NBRNM) have played an
essential role in mitigating the economic and social impact of the

“As in other parts of the world, the economy contracted sharply in 2020.
Unemployment, however, has increased only modestly, due to fiscal support
measures. Headline inflation has picked up, primarily reflecting higher
food prices. While a rebound in economic activity is expected in 2021, the
second wave of the virus poses a considerable downside risk, despite recent
promising news on vaccine development.

“Addressing the health crisis remains a top priority and will be essential
for safeguarding the economy and public finances. In the near term, fiscal
policy should remain supportive to help revive growth, preserve jobs, and
protect the vulnerable. The draft budget for 2021 foresees a sizeable
increase in capital spending, which––if implemented––could help boost
demand and lift the growth potential of the economy, provided that spending
is focused on high-quality projects. The draft budget also contains a
contingency envelope for possible new stimulus measures. This could be used
to extend wage subsidies, unemployment insurance, and social safety nets in
a targeted manner, with the understanding that additional funds may be
needed as the situation evolves. The planned credit guarantee scheme will
help support firms’ liquidity. Fiscal risks related to budget revenue
shortfalls, state-owned enterprises, and Public-Private Partnerships
require close monitoring.

“In the medium term, the key objective is to achieve higher growth to
improve living standards and income convergence with other European
countries, which will require more investment in human and physical
capital. Measures that reduce the revenue base and tax collection more
broadly or increase recurrent spending, such as on pensions and subsidies,
would go in the wrong direction as they imply less space for
growth-enhancing investment.

“The accommodative monetary policy stance is appropriate and the NBRNM
stands ready to act as needed to protect the de-facto exchange
rate peg. The overall banking system remains well capitalized and
profitable but going forward banks’ lending capacity is expected to be
lessened by a likely deterioration of asset quality.
It is important to maintain strict loan classification and provisioning
rules to ensure that banks set aside sufficient reserves to cover
potential losses. Banks should be encouraged to refrain from
discretionary dividend distribution and share buy-backs.

“Given the criticality of the NBRNM’s capacity to take prompt supervisory
actions to ensure the stability of the financial system, it is essential to
preserve the NBRNM’s independence. This will enable it to continue
fulfilling its mandates of maintaining price stability and protecting
financial stability, which are crucial preconditions for sustainable

“We would like to thank our counterparts for the candid and productive
discussions and wish the Government and people of North Macedonia success
in overcoming the pandemic.”

IMF Communications Department

PRESS OFFICER: Gediminas Vilkas

Phone: +1 202 623-7100Email:


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