Petar Goshev: Monetary policy challenges under a current account deficit Introductory speech by Mr Petar Goshev, Governor of the National Bank of the Republic of Macedonia, at the international conference “Monetary policy challenges under current account deficit”, during the 60th anniversary of central banking in the Republic of Macedonia, Skopje, 21 October 2006. *  *  *  Honorable President of the Government of the Republic of Macedonia, Mr. Nikola Gruevski, Honorable Minister of Finance, Mr. Trajko Slaveski, Honorable Ministers, Distinguished colleagues, Dear Malcolm, Your Excellencies, Distinguished participants in the Conference, Dear friends, I am deeply honored that I can welcome you to the first international conference organized by the National Bank of the Republic of Macedonia. To be emphasized even more is that the reason for having this conference organized, i.e. six decades of central banking on the territory of the Republic of Macedonia, is extraordinarily important for the Macedonian state. The topic of the conference, Monetary policy challenges under current account deficit, is not selected by chance. It is contemporary both for the Macedonian economy and for a number of transition economies whose transition path is also followed by our economy. If we consider addressed the issue of price stability, as a primary objective of the monetary policy, then the issue of how to achieve this objective in conditions of globalization of the financial markets, balance of payments' deficits and an intensified trend of liberalization of the capital flows, becomes the basic puzzle. Therefore, today we would like to discuss these issues.

The Albanian banking sector remains sound, despite the challenges posed by the pandemic. The immediate operational measures taken by banks, as well as the macro and micro prudential measures taken by the Bank of Albania, ensured not only a continuation of the operation of the critical functions of the banks, but also satisfactory financial intermediation despite the great shock suffered by the economy. Credit to economy is growing (it grew by 6.3% in the third quarter 2020), capital is adequate and the banks’ balance sheets remain healthy, signalling their ability to withstand first-round shocks. We are optimistic that the economic activity is expected to revitalize over the next two years. However, the economic outlook for the future is accompanied by a high level of uncertainty and downside risks. In the short term, the risks are mostly related to 1/3  BIS central bankers' speeches  the uncertainty of the pandemic itself, its severity, duration, and potential return of restricting measures. In the long run, the risks relate to the long-term damage sustained by the productive capacities and domestic demand, as well as potential structural change sustained in the economy as a result of the altered behaviour of economic agents. We are sure that research based evidence, analysis and forecasts will provide accurate and timely information for policy orientation and coordination. Research in the area of monetary policy, financial stability and banking supervision has always dominated the topics of our workshop. This year COVID-19 has entered the agenda by brute force.