dimitar bogov : we will need foreign loans also in the coming years interview with mr dimitar bogov, governor of the national bank of the republic of macedonia, in utrinski vesnik, conducted by ms nina nineska - fidanoska and published on 22 august 2013. * * * mr. bogov, in june, lending grew by only 3. 7 percent, which is considered a very low rate. few months ago, businessmen called for an annual credit growth rate of 8 to 10 percent. is there a chance to reach that goal and when? it is usually considered that credit growth should be two times the nominal growth of the gross domestic product. this means that if we want to achieve long - term real gdp growth of some four to five percent and inflation of two to three percent, then certainly i would say that credit growth of 10 to 15 percent is normal and desirable. but we were in a period of slower economic growth, so that the credit growth rate was relatively low in the last year. this year it continued, and in june we had an annual credit growth rate of 3. 7 percent. it is low, but in line with our projections. for the entire year we expect credit growth of 7 percent and we believe we will achieve that rate. in june and july we already have a more intensive monthly credit growth compared to the previous months and we expect that trend to continue. for the next year, we are more optimistic, and in our projections we expect credit growth of up to 9 percent. in july, the national bank of the republic of macedonia made changes in the reserve requirement and also reduced the key interest rate to 3. 25 percent, which is the historically lowest level. when do you expect the effects? we made some changes, so that we reduced the reserve requirement ratio for denar deposits and we increased that for the foreign currency deposits. our goal is to stimulate denar saving at the expense of the saving in foreign currency, which in this way will become more expensive, while saving in denars will become cheaper. shortly after that, we reduced the key interest rate to 3. 25 percent, thus sending a signal to the banks that there is room for greater lending activity. even that small amount of loans does not go to the companies, but mainly to the citizens. why is that so and when will it change? in 2009, soon after the outbreak of the global economic crisis, banks here immediately stopped lending to households

and between 1. 5 % and 2. 5 % in 2008. in 2008, a declining impact from indirect taxes and energy prices is expected to be compensated by higher pressures from unit labour costs. compared with the june 2007 eurosystem staff projections, the new ranges for 2007 and 2008 are within the ranges previously projected. the governing council is of the view that risks to this outlook for price developments lie on the upside. these upside risks include increases in indirect taxes beyond those anticipated thus far and further increases in oil prices and prices for agricultural products. more fundamentally, stronger than expected wage developments and an increase in the pricing power in market segments with low competition may occur. such developments would pose upside risks to price stability. it is therefore crucial that all parties concerned meet their responsibilities. the potential materialisation of these risks – or their abatement – requires close monitoring. the monetary analysis confirms the prevailing upside risks to price stability at medium to longer - term horizons. on the basis of the latest available data ( covering the period to the end of july ), the underlying rate of monetary and credit expansion remains strong. this is reflected in the rapid growth of the broad monetary aggregate, m3, which grew at an annual rate of 11. 7 % in july, and the strength of mfi loans to the private sector, which continue to increase at double - digit rates on an annual basis. when identifying and assessing the policy - relevant underlying trends in monetary expansion, it is important to look through short - term volatility and the impact of temporary factors on developments in specific monetary aggregates. taking the appropriate broader and mediumterm - oriented perspective, there are several indications that increases in short - term interest rates over recent quarters have influenced monetary developments. for example, increases in short - term rates have contributed to a more modest expansion of m1, as the opportunity cost of holding the most liquid components of m3 has increased. moreover, higher short - term rates have led to some stabilisation in the growth of mfi credit to the private sector, albeit at double - digit annual rates, with the growth of household borrowing moderating as house price dynamics and real estate activity have slowed. however, these developments are yet to dampen the overall rate of monetary expansion, as the flattening of the yield curve has increased the attractiveness of monetary assets relative to less liquid longer - maturity instruments, thereby causing broad money growth to rise. furthermore, the growth of loans to non - financial companies has shown renewed