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Macedonia Current Account to GDP

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Comparison with previous year 2007, the inflows of portfolio investments were 114.4 million Euros (NBRM, 2009). This movement continued during 2009. According to NBRM (2009) for the whole of 2009 in the Macedonian economy, the total investments were 171, 9 million Euros or 2, 6% of GDP which signify an annual reduction of 58%. The main reason for this change is due to that the parent banks were withdrawing liquidity via paying dividends and transferring the profit from their associates in Republic of Macedonia.

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According to the annual report of 2010 the net outflows based on income from foreign direct investments increased but net inflows from portfolio investment income decreased on annual basis due to the payment of the interest for the second Eurobond in July. Net outflows that were based on payments of interest on financial loans increased as a result to the higher net payments by the corporate sector. In 2010, foreign direct investments (FDI) inflows, on net basis, amounted to Euro 219.9 million, of 3.2% of GDP, thus registering significant annual growth of 60.6%, or 1.1 percentage point of GDP. In the following year financial inflows from foreign direct investments increased to 301.9EUR million which is close to the average level of FDIs prior to the crisis. In comparison with the previous year 2010, there was a steep growth of 91.5% or by 1.8 percentage points of GDP. In 2015, foreign direct investment provided additional inflows in the financial account of 1.9% of GDP, mostly in the form of intercompany debt, but was moderately lower compared to the previous year. Direct investments of foreign investors were mostly made in the services sector, manufacture of food products, beverages and tobacco, metal and mechanical products (NBRM, 2015). Additionally, in 2016 the net foreign direct investment grew to 3.6% of GDP (NBRM, 2016).

The unfavorable economic conditions on the global level had significant transmission effects on the current account in 2009. In the course of the year, there was a change in the trends, so in the first quarter of the year the crisis manifested itself with a rapid and strong decline in the foreign demand and worsened expectations of the economic entities for the stability of the domestic currency. In this period, the deteriorated trade deficit (higher decline in exports with demanded import response), along with negative income and reduced private transfers, caused widening of the negative gap in the current account in this period compared to the same period of 2008, while the deficit reduction started after the second trimester. Thus, by the end of the year, the deficit was reduced to 6.8% of GDP. From the figure 26 we can notice that in 2008 the current account deficit was – 12.7% from the GDP and was higher than in 2009.

The following year 2010 decreased to -2%. The least deficit was recorded in 2014 (by 0.5 percentage points of GDP) as a result of the improving trade balance in goods, amid slight deterioration in the secondary income and services. In 2016, the current account deficit was started to increasing due to the deepened primary income deficit, which corresponds to the higher estimated investment income of the foreign-owned companies, and the reduced positive balance of the secondary income, partially reflecting the effects of the uncertain political environment on the expectations of the domestic entities. In the following year the deficit was decreasing to -1.3%. The nonperforming loans in the bank’s portfolio are a very important indicator of the level of credit risk. The bank has higher credit risk if there is a higher percentage of nonperforming loans in the total amount of issued loans.

Loans that are categorized as nonperforming loans with higher credit risk C, D, E (nonperforming loans) in the total loans of the bank in the third quarter of 2009, were 9% compared with 6.5 % in 2008 (NBRM, 2010). This movement is a result of the low liquidity in the economy, and companies and households were not in condition to repay their loans according to the contract. The higher ratio of nonperforming loan in the bank’s portfolio can jeopardize the smaller banks. Banks were fearing of failure and were uncertain for approving new loans. According to Nenovski (2012) the year 2009 resulted with intensified increase of the unemployment rate. The increasing trend continued and in 2010. In 2009 the unemployment rate was 32.3%, by the end of 2010 the unemployment rate reached 33.5%, which was 1,2% higher than the unemployment rate in 2009.

In the second half of the 2010 the unemployment rate started to decrease and reach 30.9%. In 2009, the Eurobond was broadcasted on the international market in order to cover the public debt. This security was rated with BB and BB + by Standard & Poor’s and Fitch. The demand for the Eurobond was higher than the offered amount defined in the issuing prospectus for 48.6 million euros, and the investor base was geographically distributed throughout the European continent and beyond, such as investors from the UK (59.9%), Switzerland (11.3), Brazil (8.6%), Austria (6.9%), Denmark (5.1%), Germany (3.1%), Greece (2.9%), Benelux (1.5%) and other countries (0.7%). The main buyers are asset management companies (35.8%), pension funds (22.9%), investment funds (18.6%), private banks (10.8%), banks (7.6%), insurance companies funds (3.4%), and others (0.9%) (Ministry of finance, 2009).

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