Skopje, 10 November 2022 (MIA) – The high inflation rate, reaching 19.8 percent in October, comes are a result of the economy’s reliance on imports, the modest national capacities for food and energy production, and the structure of consumption (53 percent spent on food and energy), Faculty of Economics professor Borche Trenovski tells MIA. Professor Trenovski says that economic policies, if timely and properly streamlined, can affect the mitigation of prices on the short run, “but more efforts are needed for significant changes in the mid-term.” “What we have learned from this global and domestic economic/energy crisis is that all countries are exposed to global crises, whereas small and open economies are especially vulnerable, with timely investments required in building a sustainable and resilient economic system. It is evident at this time that lower inflation rates in most of the economies are related to the structure of their economies, electricity and food production, and the possibilities for these economies to reduce the global price pressure. This is not an easy task and it has been our homework that we failed to write over the past two decades,” says Trenovski. According to him, continued reduction of import dependency, energy independence, diversification of exports, development of agriculture, food production and investments in human capital can ensure North Macedonia’s preparedness for current and future economic disruptions. “This is not easy but I hope we will not waste time and learn the same lesson again in the future,” notes Trenovski. Asked on ways to mitigate inflation and reduce the economy’s vulnerability to external and internal shocks, the professor says fiscal and monetary policies are the key. “The central bank started to undertake a number of measures since last year, by increasing the basic interest rate, which currently amounts to 3.5 percent, changes in the mandatory reserves to stimulate savings in denars, stimulation of green crediting etc. Nevertheless, it is very important to follow monetary trends, stability of the financial sector, real estate market, fiscal policy trends but also to act with determination. The National Bank needs to closely monitor inflationary projections and the policy of the European Central Bank, due to the denar’s peg to the euro. Several instruments have to be utilized, not only the basic interest rate,” says Trenovski. On the other hand, he adds, the Government should put its entire focus on reducing the uncertainty over its steps, collect fiscal revenues more efficiently and provide targeted support to businesses and citizens. “It needs to focus on timely information and accountable/efficient implementation of measures, especially taking into account the discipline/manipulation of markets. The significance of fiscal policies is enormous at this time,” says Trenovski.