The International Monetary Fund expects the Macedonian economy to strengthen, saying the projected 3.5% growth is attainable. The rise in the number of employees and increased salaries in the public salaries and pensions will support consumption, while investments will be stimulated by large infrastructure projects in the public sector, said IMF Mission Head Ivanna Vladkova Hollar on Monday.

The IMF Mission spent two weeks in Macedonia, meeting with Government officials, representatives of the National Bank of the Republic of Macedonia and the private sector.

"Building infrastructure and industrial capacities is a generating force, not only in the short run, but they stimulate long-term production of economic capacities", said Hollar.

She stressed there are potential outside risks, whereas the fiscal policy should focus on meeting the projected deficit of 3.5%.

"Private consumption has strengthened, which leads the gradual withdrawal of the fiscal stimulus. Maintaining the fiscal deficit of the central authorities is important for the debt sustainability", said Hollar at a joint press conference with Vice Premier and Finance Minister Zoran Stavreski and National Bank Governor Dimitar Bogov.

She believes the mid-term fiscal strategy should be accompanied by debt management.

"The debt management strategy should aim towards balancing the costs and the risk related to the selected debt structure, but also to secure consistency with the monetary and fiscal policy", added Hollar.

Pertaining to the financial sector, she said it is stable, but further relaxation of the monetary policy is not recommendable, especially taking into account that the credit growth is accelerating, while reserves are dropping.

"If there is pressure on the reserves, the National Bank should increased the interest rate", said Hollar.

The IMF official underlined the reduction of the unemployment rate should be carried out through cooperation between foreign and domestic companies, as well as application of new skills and technologies.

Finance Minister Zoran Stavreski said the Government and IMF's positions were similar.

"Macedonia's economy has a favorable growth trend, which is properly balanced between investments and consumption. Investments will mainly be supported by large infrastructure projects, whereas increase of salaries in the public administration and pensions will stabilize personal consumption, representing the base for more balanced growth in coming years", stressed Stavreski.

According to him, the fiscal policy is properly set up, including maintenance of the fiscal deficit in moderate terms.

"The deficit is projected at 3.5 percent and we are prepared to achieve this. Gradual fiscal consolidation is expected in the coming years, adapted to the economic growth and private sector investments", said Stavreski.

He added the budget deficit would be financed through combination of domestic and foreign indebtedness.

Governor Dimitar Bogov said the monetary policy would continue to focus on the stability of the Denar's foreign currency exchange rate and balanced fiscal policy.

"We believe the stable environment resumes, with the foreign currency reserves expected to rise in the coming period. The drop, which was expected in Q1, is behind us", stressed Bogov.

He added the monetary policy would now focus on maintaining the balance, primarily through monitoring of trends in the foreign currency reserves and the foreign currency market.