, mosques and castles. after the ii world war, the republic of macedonia was one of the six republics that have formed yugoslav federation. as sovereign parliamentary democracy, we have gained our independence in 1991, and the monetary independence in 1992, with denar as a national currency. part of the rich history of macedonia can be seen in skopje, the capital city of the country. in that respect, the old fortress kale, that overlooks the modern city center, offers an insight in the first neolithic settlements, while old bazaar, with its narrow streets and craftsman shops, is a snapshot of the ottoman rule. this part of the city survived the 1963 earthquake, when nearly all the city's beautiful neoclassical 18th and 19th century buildings were destroyed. after the earthquake, international financial aid poured into skopje in order to rebuild the city. today, skopje is seeing a makeover in buildings, streets and shops, and many projects ( macedonian struggle museum, the archeological museum of macedonia, national archive, constitutional court, new philharmonic theatre ) were finished in order to return some of the looks and spirit of the city. in economic aspect, being many times since 2006 on the list of 10 best reformers by the doing business rank of the world bank, proves that macedonia has undergone considerable economic reforms. it has developed as an open economy with the trade accounting more bis central bankers ’ speeches than country's gdp in recent years. although the environment was highly difficult, first with the global financial crisis, afterward with euro area crisis and more recently, with greece crisis, our gdp growth was on average above 3 % for whole this period, which is one of the highest in europe, and for 2015 it is expected to be around 3. 5 %. the unemployment from a very high level, throughout this period is on declining path, by implementing many structural reforms and almp. the government strategy to attract foreign investments and establishment of a good business environment for the development of small and mediumsized enterprises ( smes ) was paid off. to attract foreign investors, the macedonian authorities offer a favorable tax environment ( flat tax system with low rates ), undertake the necessary infrastructural investments and create favorable business environment. it was allowed by the fiscal space before the crisis, and although the trend of the public debt is rising, now it is 43 % of gdp, still being one of the lowest in europe and broadly. government's policies and efforts for attracting fdis resulted in an establishment of local

4 bis - central bankers'speeches " normal " – in a more permanent manner? or should we expect the persistently low interest rates, observed post - 2008, to return and be our " new normal " again? this obviously depends on the natural rate of interest, or r * in short. the natural rate of interest is the real interest rate that supports the economy at maximum output and full employment while keeping inflation constant. it is the equilibrium rate and dividing line between expansionary and contractionary monetary policy. essentially, it is determined by structural factors, which, however, can be overturned at times by transitory economic shocks. this observation has two major policy implications. firstly, a structurally low r * does not rule out temporary episodes of high inflation. transitory shocks can generate persistent inflationary pressures, which – if not counteracted by monetary policy – entail the risk of high inflation through the feedback of expectations and wages. this underscores the importance of the ongoing monetary tightening and of the commitment to restore low and stable inflation. secondly, transitory high inflation and a structurally low r * can coexist. in other words, an episode of high inflation alone does not necessarily imply the reversal of low r * over longer horizons. even though it may be tempting to extrapolate the current situation to the future, we cannot assume that it automatically marks the end of the long - standing secular decline of the natural rate. so, whither r * – what should we think about it at this point? assessing its level is challenging as it is unobservable and can only be estimated. when thinking about whether the natural rate has remained low, we need to look at the factors which were believed to have caused the low level. factors typically viewed as important include demographic change, an increase in inequality and the slowdown in productivity growth. these demonstrate that the secular drivers of r * are inherently structural, which is why a major reversal in just a few years seems unlikely. we thus have reason to assume, at least as a baseline, that the natural rate will remain close to the pre - pandemic levels once the current inflationary pressures subside. this implies that the challenges for monetary policy, particularly from the effective lower bound, are likely to persist. this underlines the importance of strategic reviews conducted by central banks just before the inflationary shocks. this view on the natural rate is also shared more broadly, as reflected in the most recent imf world economic outlook