North Macedonia's central bank, the NBRM, announced on May 10 that it raised its policy rate by 0.25 percentage points (pp), to 5.75% (chart).

With the latest update, the trend of tightening the monetary policy that commenced in late 2021 continues. Initially, it involved actively managing liquidity through interventions in the foreign exchange market. Subsequently, starting from April of the previous year, it expanded to include raising the interest rate on treasury bills and other monetary instruments.

The central bank also decided to increase the interest rate on overnight deposits by 0.25 pp to 3.65% and the rate on seven-day deposits also by 0.25 pp to 3.7%.

In terms of inflation, there is still a trend of slowing growth of consumer prices, which in April 2023 fell to 13% vs.14.7% in March, the central bank said.

The slower annual growth of inflation mainly results from the lower price growth in the food component. The latest expectations for movements in import prices point to a downward movement of oil and food stock prices, which would have a favorable effect on domestic prices, but the uncertainty in the next period, conditioned by the effects of the war in Ukraine, is still emphasised.

The present indicators for GDP growth during the first quarter of this year suggest a modest year-on-year expansion in industrial production and a slight increase in total trade turnover.

On the other hand, the construction and hospitality sectors have demonstrated robust growth rates. These trends collectively indicate a probable moderate upturn in growth during the initial quarter of 2023.

North Macedonia ended 2022 with an estimated GDP growth of 2.1%.

Meanwhile, North Macedonia sold out MKD10bn (€162.6mn) of 42-day central bank bills on May 10 with an increased interest rate of 5.75%.

The next auction will be held on June 21.