Macroeconomic Forecast Macedonia

Macedonia entered deflation in April, with CPI growth coming in at -0.5% y-o-y, compared to 0.2% in March. The single largest driver of the fall in headline inflation was the transport component, where prices fell by an impressive 11.8% y-o-y on the back of still-depressed global energy prices relative to this time last year. Deflation was also registered in the food component, where the successful summer 2008 harvest and weak consumer sentiment combined to result in price growth of -1.0%. We maintain that Macedonia will experience deflation for much of 2009, before ticking back to positive CPI growth of 0.3% by end-year due to low base effects.

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