anita angelovska bezhoska : the denar was and remains one of the key pillars of the stability of the macedonian economy address by ms anita angelovska bezhoska, governor of the national bank of the republic of north macedonia, on the 29th anniversary of the monetary independence, skopje, 26 april 2021. * * * monetary sovereignty is one of the main components of the sovereignty of any state. today we mark 29 years since the laying of the foundations of our monetary independence – the day when the denar replaced the yugoslav dinar, and the national bank began to function as an independent central bank, facing numerous challenges in those turbulent times of separation from the former yugoslav state. looking back through years, we can freely say that the monetary independence took place in an extremely difficult period marked with high macroeconomic instability as its main feature. frequent exchange rate devaluations, when there were almost no foreign reserves, along with structural problems, ignited inflation, which reached four - digit levels, and all this had strong effects on the economy and the living standards of citizens. the economy has been declining 1996, when economic growth of 1. 2 % was registered for the first time since independence. hence, no doubt that establishing a stable macroeconomic environment required great courage, commitment and professionalism of the national bank team. the efforts of the national bank, together with other policy makers and the academic community, have played a key role in ceasing the inflation spiral and stabilizing the exchange rate of the domestic currency. in 1995, the monetary strategy of stable exchange rate of the denar was formalized – a strategy for which then and now there is a broad consensus that it is one of the key pillars of the stability of the macedonian economy. the benefits of macroeconomic stability have been enjoyed for 24 years. our economy is small, commercial and financially open and hence, prone to external shocks. despite the numerous external and internal shocks, the national bank constantly succeeds to keep inflation at a moderate level, which is similar to the european level. low inflation is extremely important for the protection of the real purchasing power of citizens, but also for maintaining the competitiveness of our exports without which small economies like ours can not achieve higher and sustainable growth. the maintenance of low and stable inflation, as the main goal of the central bank, is underpinned by the stable exchange rate of the domestic currency against the euro. the prudent monetary policy, as well as the good coordination

to global factors that are not exclusively related to the commodity prices fluctuations, but also to the impacts of the globalization of production and digitalization of trade worldwide, both having impact on competition and prices in each economy. in such surrounding of prolonged lower inflation, the re - assessment of the time lag in affecting the inflation as well as the inflation measurement, the outlook of inflation expectations and their possible de - anchoring are to be considered. the current economic developments and outlook point to new a global cycle and the need of gradual normalization of monetary policy. gradual approach is required to avoid the so - called “ taper tantrum ” episodes that financial markets have already experienced during the us tapering. a stronger and clear monetary policy communication should be in favor of preparing market agents for the future monetary policy changes and smother reaction when they take place. 1 / 2 bis central bankers'speeches the monetary policy normalization in advanced economies could produce different impacts for emerging economies and their monetary policy. any capital outflows would be highly dependent on the size and structure of the financial liabilities, especially regarding the existence of interest rate sensitive capital flows, that is not always the case in emerging economies with lower level of financial integration, where more usual are the direct investment, trade credits and banking sector capital flows. on the other hand, the more restrictive financial conditions in advanced economies in a medium run could eventually lead to lower external demand in the emerging economies. the impacts on the fiscal policy are more serious, implying stricter conditions for external budget financing, signaling the need to start or continue with fiscal consolidation, in the emerging economies where it has already started. having in mind country specific reasons, monetary policy normalization in emerging economies may come with different lag. speaking about the macedonian economy and countries from western balkan region in terms of facing the new global cycle, we have to mention some strong points and some still existing weaknesses. generally, sound and stable banks have additionally strengthened due to the new capital requirements during the last several years, as well as due to the stronger efforts for better nonperforming loans management and resolution. current account deficit region - wide has reduced as a result of the favorable price impact, in line with commodity prices slowdown and in the macedonian case, due to the contribution of new companies with foreign capital that significantly changed our export structure into higher value added products. we have seen positive results in the dealing with unemployment as one of the main problems in the region. in macedonia, it