Skopje, 29 July 2023 (MIA) - The denar is stable and foreign reserves are at a proper level. The National Bank's monetary policy and easing commodity prices have contributed to a slowed inflation, which is expected to reduce further. Non-performing loans remain low, whereas capital adequacy is solid and stable, says credit agency Standard and Poor's in its latest report that affirms North Macedonia's credit rating at BB-/B.

The report notes the agency's expectations for further maintenance of the exchange rate despite a tough external environment. It also highlights the rising foreign reserves that amounted to EUR 4.2 billion in June, primarily attributed to external government borrowing and interventions by the central bank, and expects foreign reserves to be stable.

After peaking by the end of 2022, inflation has gradually slowed down to 9.3 percent in June, and S&P anticipates a further deceleration in the coming months given easing commodity prices and monetary policy tightening by the National Bank.

"The NBRM responded by adjusting reserve requirements in the past year, reducing them to 5% for the domestic currency and increasing them to 19% for foreign currency deposits. The sector's nonperforming loans remain low at 2.8% of total loans, and the capital adequacy ratio was stable at 18% in first-quarter 2023. As a result, the likelihood of contingent liabilities for the government arising from the financial sector remains reasonably low in the near term," notes S&P.

Photo: National Bank