Page 117 - SE Outlook Regions 2023

stake representing the manufacturing expansions in different lines of
business.

3.8.2 Banks

The World Bank said that the banking sector remained stable, but the
liquidity and capital adequacy ratios fell to 20.5% and 17% in 1Q22,
respectively.

The banking sector is expected to continue to provide support for the
economy, with further growth in crediting but at a more moderate pace.
The growth of loans in 2022 will amount to 9.2% on an annual basis.
The credit growth will be supported by the growth of deposits, as the
main source of financing. Deposits are expected to reach a growth of
3.9% by the end of 2022. In the medium term, with the strengthening of
economic activity, a growth of deposits of about 8% is expected in the
period 2024-2025 .

The central bank said that a moderate slowdown in the growth of credit
activity is expected until the end of 2022, which will continue in 2023.

Loan growth in 2022 would reach 9.2% year on year and will slow
down to 7.1% in 2023. In the next period, credit activity is expected to
stabilize, with an average growth rate of 7.5% in the period 2024 -
2025, in conditions of growth of the domestic economy and increased
demand for loans from households and the corporate sector. Despite
the war in Ukraine, the measures taken by the central bank enabled
further growth of deposits which is expected at 3.9% in 2022. Measures
taken by the central bank to encourage denar savings will lead to a
growth of deposits of 6.5% in 2023 and an average 8% for the period
2024-2025.

According to the central bank, North Macedonia’s financial system is
stable, despite the escalation of geopolitical tensions created by
Russia's military invasion of Ukraine, as well as global challenges
related to the energy crisis and high inflation rates. However, in
conditions of increased uncertainty, the need for a thorough risk
assessment, appropriate risk management and further capital building
in order to ensure greater capacity of financial institutions for risk
absorption is emphasised even more.

The International Monetary Fund (IMF) said the banking system is
overall well capitalised, with a core Tier 1 capital ratio of 15.9% at
end-June 2022. Banks benefit from stable funding mainly local deposits
and liabilities of foreign banks to their parents remain low. NPLs
declined to 3.1% at end-June 2022. Stress tests by the NBRNM
indicate that the banking system could withstand a severe
macro-financial shock.

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