The Former Yugoslav Republic of Macedonia’s (FYROM) monetary authority will allow measures aimed at preventing capital flight to neighboring Greece to expire at the end of December because the crisis there has eased, central bank Governor Dimitar Bogov said.
“These measures had a preventive effect, so they didn’t disturb business,” Bogov said Monday in an interview in Zagreb, Croatia. “The situation has meanwhile stabilized in Greece, so we don’t expect the measures’ expiration to have a negative effect on the Macedonian economy.”
At the height of Greece’s financial crisis in June, the former Yugoslav republic prohibited the transfer of capital and foreign direct investment, as well as lending, to its southern neighbor. Greek banks hold about 6 billion euros ($6.5 billion) of FYROM’s banking assets, or 22 percent.
The measures followed a political crisis in May in which the opposition accused the government of wire tapping the phones of thousands of people including police, judges, journalists and foreign diplomats. That exacerbated the effects of the crisis in Greece. The double hit prompted the central bank to cut its economic growth forecast last month to 3.2 percent for this year from an earlier prediction of 4.1 percent, Bogov said. It lowered its 2016 estimate to 3.5 percent from 4.5 percent.
“These shocks took a toll on the economy, but even with two such strong shocks, the economy will perform with moderate growth,” Bogov said. “That’s why it’s very important that political uncertainty doesn’t create an additional burden.”
The yield on FYROM’s euro-denominated bond maturing in July 2021 fell six basis points to 5.057 percent at 9:11 a.m. on Tuesday in Skopje. That compares with a 2015 low of 3.474 percent on March 9 before the political crisis began.
Prime Minister Nikola Gruevski, whose government has denied wrongdoing, eventually agreed with opposition leader Zoran Zaev to defuse the tension between them, form an interim government and hold general elections in April 2016. At the same time, the country is trying to deal with an inflow of tens of thousands of migrants.
In recent months, “confidence is returning, deposits are returning,” Bogov said. He added that the central bank sees credit growth of 8 percent this year, and it’s planning measures to encourage mortgages and corporate loans.
“Greek-owned banks are in excellent shape,” he said. “They’re functioning on a stand-alone basis, without support from parents. They have sufficient capital and liquidity.”
The landlocked nation asked the European Union earlier this year to help it deal with migrants, as it’s a main conduit for hundreds of thousands of people fleeing the Middle East via Turkey, Greece, the Balkans and then north and west to richer EU states.
“Macedonia’s costs of coping with this crisis were about 2 million euros ($2.2 million) a month, and now they’re increasing because of the expanded efforts of security officers,” Bogov said. “This isn’t an issue that Macedonia can solve alone, and we expect European engagement.”