The experiences of the transition countries in dealing with this problem vary. One can notice, though, that in most of them the process of structural reforms implementation and conduct of sound and consistent macroeconomic policies, with the EU integration being a clearly defined objective, produced positive achievements in the external sector. Nevertheless, registered improvements in the exports are still insufficient for a more significant reduction of the trade deficit, having in mind the initially high imbalance in the foreign trade, which is a logical consequence of the inherited economic structures, whose main  1  P. Lane, G.M. Milesi-Ferreti, "Capital Flows to Central and Eastern Europe, Working Paper 188, 2006, IMF. 2  It refers to 11 countries from Central and Eastern Europe-CEE. BIS Review 100/2006  1  feature is lack of flexibility and import dependence. The problem regarding the balance of payments current account deficit is even bigger if one has in mind the fact that the negative trade balance is to a large extent compensated with the positive achievements in services and private transfers, as current account components, which in 2003 (according to BIS 3 calculations) compensated over 45 percent of the negative trade balance. Vulnerability of the transition economies with respect to the sustainability of the current account balance is additionally increased, if it is considered that in the process of creating a "market economy", these economies faced also with a process of trade liberalization, which, especially in a short run, may additionally contribute to the trade imbalance.

Having in mind that the Macedonian economy is characterized by initially high trade deficit and current account deficit (substantially mitigated by the private transfers) it is essential for the macroeconomic policy decision-makers to consider the experiences of the advanced transition economies with respect to all significant aspects related to the process of real convergence to the EU, including the enlargement of markets and facing with increased competition, possible effects from the liberalization of the goods and capital flows, as well as the possible measures and reactions of the macroeconomic policies with respect to these issues. High trade deficit, and consequently the current account deficit, had certain repercussions on the monetary policy conduct. Lack of foreign exchange in the Macedonian economy caused constant pressures for depreciation of the Macedonian Denar, which under a strategy of exchange rate targeting ultimately produced relatively higher interest rates. Such conditions changed significantly in the last two years. The political stabilization of the country and of the region, given the maintained macroeconomic stability and clear European orientation confirmed in 2005 with the acquiring of the status of candidate country for European Union membership, created environment for significant positive achievements in almost all sectors of the economy. In the external sector, higher growth rates of exports are recorded, which in 2005 were twice higher than the growth rate of imports of goods. The stabilization generated high foreign exchange inflows from private transfers that enabled significant decrease of the current account deficit. In 2006, sizeable external inflows were registered from the continuous privatization process.