Anita Angelovska Bezhoska: Speech at the Ministerial Dialogue on the Economic Reform Programmes of the Candidate Countries Speech by Ms Anita Angelovska Bezhoska, Governor of the National Bank of the Republic of North Macedonia, at the Ministerial Dialogue on the Economic Reform Programmes of the Candidate Countries, Brussels, 17 May 2019. * * * Dear Ministers, Dear representatives of the European Commission, European Central Bank and Eurostat, It is always a great pleasure to be part of the regular Ministerial Dialogue, having the opportunity to reflect on important issues that are in the spotlight of the economic agenda. At the same time it as an excellent occasion to express our appreciation on the provided assessments of the Economic Reform Programme. The main takeaways from these assessments have been important guidelines, mapping our policy actions, enhancing our capacity, and providing for faster closure of the existent gaps. Now, let me briefly reflect on the topic of Structural reforms for attracting foreign direct investment and increase resilience. There is no doubt that investments are one of the key ingredients for increasing the long-term potential of an economy. When it comes to emerging economies, commonly there is a need for additional cross – border capital, which can complement the insufficient domestic saving. The more these flows are comprised of FDIs, the higher the positive impact on productivity and competiveness. In the regional context, pre-crisis investments were an important growth driver, reaching close to 30% of GDP, while in the postcrisis period investment ratios has plunged.

North Macedonia stands out as an outlier, as the share of investments continued to increase, and it is one of the rare economies with investment level currently well above the pre-crisis one. This reflects stable and resilient domestic financial system, and rising inflows of FDIs, mostly in the tradable sector, that persisted despite the global crisis. This process was driven by the investment supportive policies and reforms, that significantly improved the business environment, as visible through the high ranking on the WB’s Doing business - improvement of 22 positions in ten years, currently ranked tenth. It diversified the structure of the economy, making it more resilient to external shocks, and leading to positive shifts in the export base towards higher value added products. The outcome of this process was visible improvement of the external position of the economy, and further increase of official reserves, thus creating room for accommodative monetary policy, given the de facto fixed exchange rate. Clearly, we are a good example that reforms pay off and we remain committed to their implementation. The best contribution that we as central bank can and do make is to maintain price stability and assure and strengthen the soundness of the financial system. Macroeconomic and financial stability is the basis of the investment climate that when in place significantly reduces the country risk premium and attracts foreign investors, but also boost domestic savings. In this light, in recent period, we have undertaken a number of measures to assure for the soundness and resilience of the banking system.