Skopje, 7 October 2023 (MIA) - Tighter monetary policy has contributed to inflation returning to single digits, according to Fitch Ratings in its latest rating action commentary on North Macedonia, affirming it at 'BB+' with stable outlook, the National Bank said in a press release.

Fitch expects inflation to continue to ease, adds the press release, noting that in the past eight months, FX reserves have increased, while the current account deficit has narrowed, and the banking sector is still healthy and adequately capitalized.

"Fitch points out that inflation has returned to single digits, at 8.3% in August from 19.8% in October 2022, owing to base effects and tighter monetary policy. However, food inflation remains high and relatively sticky, in response to which the government froze some prices in September. Fitch expects inflation to continue to ease given base effects, the food price freeze and tighter monetary policy, although the adjustments to public sector wages and pensions in the budget reallocation will feed into prices. Fitch assumes that headline inflation will return to low single digits over 2024," reads the press release.

The banking sector is still stable and profitable, and capital adequacy has recorded growth, reaching 18.2%, while the economic environment had no effects on non-performing loans, which remained at a low level. Real estate prices are slowing after a period of rapid growth reflecting higher interest rates, hikes in the counter-cyclical buffer and borrower-based prudential measures, adds the press release. 

Photo: National Bank