EC Report: High Level of Alignment with the EU on Monetary Policy

Skopje, 2 November 2024

The alignment with the EU acquis on the monetary policy remains high, as stated in the latest European Commission Progress Report for the country. The Report notes that the monetary policy setup was adequate to deal with the high inflation, and that the inflation was reduced from 19.8% in October 2022 to 2.2% in August 2024. The Report also emphasizes the need for additional amendments to the legislation to enhance the provisions pertaining to the central banks independence.

"The primary objective of the central bank is to achieve and to maintain price stability. To curb inflation and inflation expectations, and to underpin denarisation, the central bank has raised the key policy rate, withdrawn liquidity, and adjusted reserve requirements" the Report states, indicating that the central bank has stopped tightening the monetary policy, as soon as inflationary pressures eased.

The European Commission indicates that the banking sector proved to be resilient, while the macroprudential framework enhanced. Capital adequacy is significantly higher than regulatory requirements. Liquidity is high, while the share of non-performing loans in total loans is at a historically low level. The macroprudential framework have been upgraded further, with the National Bank continuing to increase the counter-cyclical capital buffer rate, and introduced macroprudential measures to overcome risks in the real estate market.

The enhancement of the legal and institutional framework for ensuring financial stability is also highlighted in the Report, where it is indicated that the central bank continued to improve mechanisms for monitoring risks and aligning the supervisory framework with EU requirements. An emphasis in the Report is placed on the adopted Bank Resolution Law, for which the drafting of by-laws is in progress.

The Report also emphasizes the adoption of the Law on Payments and Payment Systems in the context of compliance with European directives, as well as the submission of the application for the country's membership in the Single Euro Payments Area (SEPA). It is also noted that the central bank has established a special organizational unit for consumer protection and review of consumer complaints.