Economic and Political Overview

flag North Macedonia North Macedonia: Economic and Political Overview

In this page: Economic Indicators | Foreign Trade in Figures | Sources of General Economic Information | Political Outline | COVID-19 Country Response

 

Economic Indicators

North Macedonia is the poorest of the former Yugoslav republics; however, it has made significant progress in expanding its economy over the past decade: GDP grew an average of 5% annually between 2004 and 2008, driven mainly by domestic consumption and exports (notably metals and textile products). However, following a subdued post-pandemic recovery, economic growth has decelerated due to weakened external demand and more restrained household consumption. The latest estimates from the IMF pointed to a GDP growth of 2.3%, driven by lower external demand and a slowdown in investment. Net FDI inflows are expected to enhance export capacity, while the resurgence of growth in key trading partners will further bolster real growth, reaching 3.2% in 2024 and 3.5% in 2025.

Despite facing high borrowing costs and new spending commitments, public finances were partially relieved by a budget reallocation in September, managing to accommodate additional expenditure without exceeding the full-year deficit target. The government increased the minimum pension and approved a further 10% raise in public sector wages as of September, adding approximately 0.2% of GDP to projected current expenditure for 2023. Revenue, boosted by lingering high inflation, is dampened by subdued domestic demand. However, the Parliament's adoption of a one-off solidarity tax in September is expected to augment 2023 revenue by an additional 0.6% of GDP. Overall, the general government deficit is forecasted to rise slightly in 2023 compared to 2022 (estimated at 4.5% of GDP by Fitch Ratings). If planned fiscal consolidation measures, including phasing out energy subsidies, are executed, the fiscal deficit is anticipated to gradually decrease in 2024 (3.8% of GDP) and 2025 (3.5%), though it will remain significantly above the pre-pandemic level of 2.2% of GDP in 2019. Government debt – at 51.6% last year as per the IMF - is projected to persist above 50% of GDP in the medium term due to elevated primary deficits and increasing interest payments. Annual consumer price inflation, which peaked at 19.8%, gradually declined but remained elevated, averaging around 9% in 2023. Lingering spillover effects from recent peaks in energy and food prices affected domestic sectors. However, inflation is expected to ease to the long-term average of 2% by 2025. The central bank continued to raise the key policy rate in the first nine months of 2023, albeit at a slower pace, reaching 6.3% in September (data EU Commission). While EU accession talks have faced obstacles due to Greece's historical dispute over the country's name, both the EU and Greek authorities commended North Macedonia's parliament for changing it to the Republic of North Macedonia. In March 2020, the EU's General Affairs Council agreed to begin accession negotiations with North Macedonia, and the draft negotiating framework was presented to Member States in July 2020. However, the Bulgarian government's refusal to approve the EU negotiation framework in November 2020 stalled North Macedonia's membership process due to slow progress on implementing the 2017 Friendship Treaty. This hurdle was overcome in July 2022 after North Macedonia and Bulgaria signed a bilateral protocol. Nonetheless, before formal membership talks commence, North Macedonia must amend its Constitution to acknowledge Bulgarians among the nation-building countries listed in its preamble.

Low and decreasing labor force participation, particularly among women and young workers, contributed to a continued reduction in the labor force and a decline in the unemployment rate. According to the EU Commission, employment is anticipated to steadily increase during the forecast period, albeit at a moderate rate (from an unemployment rate of 14% in 2023 to 14% by 2025). Although employment growth in manufacturing industries remained subdued in 2023 due to a backlog of inventories affecting current production, the services sectors, notably trade, are expected to drive the majority of job creation. Consequently, the unemployment rate is forecasted to further decrease as the labor force contracts. However, much of the workforce is employed in the informal economy, thus the exact level of unemployment is hard to assess. According to the latest figures from Eurostat, about a third of North Macedonian citizens live below the poverty line or are at risk of poverty and social exclusion. The country’s GDP per capita (PPP) was estimated at USD 20,162 in 2022 by the World Bank; nevertheless, the income ratio between the richest and poorest 20% of the population is more than eight times, the highest in the EU.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 13.7414.7715.8716.9017.95
GDP (Constant Prices, Annual % Change) 2.21.02.73.73.9
GDP per Capita (USD) 6,6577,1587,6948,1938,702
General Government Gross Debt (in % of GDP) 51.654.554.654.554.0
Inflation Rate (%) 14.29.44.02.52.0
Unemployment Rate (% of the Labour Force) 14.414.314.114.013.9
Current Account (billions USD) -0.840.10-0.13-0.46-0.49
Current Account (in % of GDP) -6.10.7-0.8-2.7-2.7

Source: IMF – World Economic Outlook Database , Latest available data

Note: (e) Estimated Data

Main Sectors of Industry

The Republic of North Macedonia (formerly known as FYROM) has traditionally relied on the agriculture sector, which nowadays represents 7.2% of the GDP and employs 14% of the active population (World Bank, latest data available). According to figures from the UNDP, the North Macedonian agricultural sector is a very profitable business, also due to widespread governmental subsidies (the largest portion of the agriculture budget consists of direct payments for agriculture production and rural development). Crop cultivation is concentrated in the southern and eastern regions of the nation, benefiting from the favorable climate. Key vegetable crops include potatoes, beans, peppers, and tomatoes, while prominent fruit crops comprise apples, plums, peaches, and pears. Tobacco stands as the paramount agricultural export commodity. Arable agricultural land accounts for half of the total territory, of which about two-thirds are categorized as pastures and the rest as arable agricultural land. According to the data of the State Statistical Office, cultivated land in 2022 covered an area of 514,436 hectares.

The industrial sector represents 22.9% of the GDP and employs 30% of the active population. It includes chemical products, steel, machinery, and textiles. The textile sector constitutes the second main industry of the country after metallurgy (especially the leather industry), with the textile production output being close to an all-time high in the last two decades. The automotive sector enjoys dynamic development and growing importance for the country’s economy. The manufacturing sector alone contributes almost 13% of the GDP (World Bank). According to data from the country’s statistical office, North Macedonia's industrial production increased by 0.7% on the year in 2023. While manufacturing decreased by 0.1% and mining by 1.6%, the utilities sector edged up by 13%.

The tertiary sector represents 58.8% of the GDP and employs 60% of the total workforce. The main income sources come from transport, telecommunications, and energy production. The information and communication technology industry is the fastest-growing sector of the Macedonian economy. The banking sector is self-funded and stable, and it is composed of 17 institutions (fifteen banks and two savings houses – European Banking Federation). Trade, transport, and tourism were among the sectors most affected by the COVID-19 crisis; however, in 2023, the number of foreign tourists who visited North Macedonia reached around 734,000, up by 37.8% year-on-year.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 10.8 30.8 58.4
Value Added (in % of GDP) 8.1 22.9 58.8
Value Added (Annual % Change) 2.0 -4.3 4.7

Source: World Bank - Latest available data.

 

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Monetary Indicators 20162017201820192020
FYROM Denar () - Average Annual Exchange Rate For 1 MUR 1.571.591.541.551.38

Source: World Bank - Latest available data.

 
 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:
68,6/100
World Rank:
46
Regional Rank:
27

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 
 

Country Risk

See the country risk analysis provided by Coface.

 

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Foreign Trade in Figures

North Macedonia has an open economy and is highly integrated into international trade, with a total trade-to-GDP ratio of over 171% (World Bank, latest data available). According to data from the State Statistical Office, in 2022 the country mainly exported supported catalysts containing precious metals or their compounds as active substances, ignition wiring sets, other wiring sets used in vehicles, aircraft, or ships, parts of seats falling under subgroup 821.1, and other supported catalysts. Regarding imports, the key products comprise petroleum oils derived from bituminous minerals (excluding crude), other metals of the platinum group and their alloys in unwrought or powdered form, unwrought or powdered platinum and platinum alloys, and motor vehicles for transporting individuals, not elsewhere specified.

In 2023, the country’s main export partners were Germany, which accounted for almost half of the total exports alone (44%), Serbia (4.8%), Kosovo (4.8%), Bulgaria (4.4%), and Greece (3.7%); with the main import origins being Germany (24.8%), the United Kingdom (7.8%), Greece (6.9%), China (5.7%), and Serbia (5.6% - data State Statistical Office). Overall, the EU accounted for 78.6% of total exports and 49.1% of imports. North Macedonia became a member of the WTO (World Trade Organisation) in April 2003. Following a cooperation agreement with the EU, North Macedonia signed a Stabilisation and Association Agreement, which concedes the country duty-free access to European markets. Lastly, in 2006, the country became a member of the Central European Free Trade Agreement (CEFTA), generally considered the antechamber of the EU.

North Macedonia's trade structure has been traditionally in deficit. In 2022, the country exported goods worth USD 8.7 billion – a 6.6% increase compared to the previous year – importing USD 12.7 billion (+12% y-o-y). With regard to services, North Macedonia exported USD 2.4 billion in commercial services, importing USD 1.6 billion (data by WTO). The World Bank estimated the country’s 2022 overall trade deficit at 21% of GDP (from 15.8% one year earlier). According to preliminary data from the State Statistical Office, the total value of exported goods from the Republic of North Macedonia in the period January-December 2023 amounted to USD 8.3 billion, a 0.3% increase compared to the same period one year earlier; whereas the value of imported goods stood at USD 11.1 billion, 8.1% less year-on-year.

 
Foreign Trade Indicators 20192020202120222023
Imports of Goods (million USD) 9,4718,71511,38612,75512,056
Exports of Goods (million USD) 7,1896,6388,1868,7278,999
Imports of Services (million USD) 1,4411,1771,4661,6472,076
Exports of Services (million USD) 1,8181,6552,0632,4322,865
Imports of Goods and Services (Annual % Change) 10.1-10.911.916.1n/a
Exports of Goods and Services (Annual % Change) 8.9-10.911.713.4n/a
Imports of Goods and Services (in % of GDP) 76.270.582.395.9n/a
Exports of Goods and Services (in % of GDP) 62.457.866.274.9n/a
Trade Balance (million USD) -2,182-2,060-2,792-3,639n/a
Trade Balance (Including Service) (million USD) -1,805-1,583-2,197-2,865n/a
Foreign Trade (in % of GDP) 138.6128.2148.5170.8n/a

Source: WTO – World Trade Organisation ; World Bank , Latest Available Data

 

Main Partner Countries

Main Customers
(% of Exports)
2022
Germany 45.1%
Serbia 9.2%
Bulgaria 5.0%
Greece 3.9%
Hungary 3.1%
See More Countries 33.8%
Main Suppliers
(% of Imports)
2022
United Kingdom 15.8%
Greece 11.2%
Germany 8.6%
China 7.8%
Serbia 7.1%
See More Countries 49.5%

Source: Comtrade, Latest Available Data

 
 

Main Products

8.7 bn USD of products exported in 2022
Reaction initiators, reaction accelerators and...Reaction initiators, reaction accelerators and catalytic preparations, n.e.s. (excl. rubber accelerators) 30.1%
Insulated "incl. enamelled or anodised" wire,...Insulated "incl. enamelled or anodised" wire, cable "incl. coaxial cable" and other insulated electric conductors, whether or not fitted with connectors; optical fibre cables, made up of individually sheathed fibres, whether or not assembled with electric conductors or fitted with connectors 7.2%
Seats, whether or not convertible into beds, and...Seats, whether or not convertible into beds, and parts thereof, n.e.s. (excl. medical, surgical, dental or veterinary of heading 9402) 3.0%
Parts and accessories for tractors, motor vehicles...Parts and accessories for tractors, motor vehicles for the transport of ten or more persons, motor cars and other motor vehicles principally designed for the transport of persons, motor vehicles for the transport of goods and special purpose motor vehicles of heading 8701 to 8705, n.e.s. 2.9%
Flat-rolled products of iron or non-alloy steel,...Flat-rolled products of iron or non-alloy steel, of a width >= 600 mm, hot-rolled, not clad, plated or coated 2.7%
See More Products 54.0%
12.8 bn USD of products imported in 2022
Platinum, incl. palladium, rhodium, iridium,...Platinum, incl. palladium, rhodium, iridium, osmium and ruthenium, unwrought or in semi-manufactured forms, or in powder form 11.2%
Petroleum oils and oils obtained from bituminous...Petroleum oils and oils obtained from bituminous minerals (excl. crude); preparations containing >= 70% by weight of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations, n.e.s.; waste oils containing mainly petroleum or bituminous minerals 8.9%
Electrical energyElectrical energy 4.9%
Colloidal precious metals; inorganic or organic...Colloidal precious metals; inorganic or organic compounds of precious metals, whether or not chemically defined; amalgams of precious metals 4.0%
Petroleum gas and other gaseous hydrocarbonsPetroleum gas and other gaseous hydrocarbons 3.1%
See More Products 67.8%

Source: Comtrade, Latest Available Data

 
 

To go further, check out our service Import-Export Flows.

 
 

Main Services

2.3 bn USD of services exported in 2022
26.60%
25.51%
20.64%
19.99%
2.81%
2.30%
1.34%
0.59%
0.18%
0.04%
n/a%
1.6 bn USD of services imported in 2022
34.23%
19.13%
17.79%
8.42%
6.35%
4.86%
3.99%
2.21%
1.23%
1.12%
0.67%

Source: United Nations Statistics Division, Latest Available Data

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Sources of General Economic Information

Ministries
Ministry of Finance
Ministry of Justice
Ministry of Economy
Ministry of Agriculture
Ministry of Labor and Social Affairs
Statistical Office
National Bureau of Statistics
Central Bank
National Bank of the Republic of North Macedonia
Stock Exchange
Macedonian Stock Exchange
Search Engines
Google
Economic Portals

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Political Outline

Current Political Leaders
President: Stevo PENDAROVSKI (since 12 May 2019)
Prime Minister: Talat XHAFERI (since 28 January 2024)
Next Election Dates
President: 24 April 2024
Legislative: 8 May 2024
Main Political Parties
The country's main political differences are often ethnically fuelled, and political parties often represent different ethnic groups of the country: the majority include Slavo-Macedonians, while the minorities are Albanian and Turkish. The major political parties include:

- Social Democratic Alliance of Macedonia (SDSM): centre-left, social democratic party, supports reconciliation with Albanian minorities. Leader of the centre-left coalition "We Can"
- Internal Macedonian Revolutionary Organisation – Democratic Party for Macedonian National Unity (VMRO-DPMNE): centre-right, a Christian democratic party supporting the interests of the ethnic Slavo-Macedonian majority.
- Democratic Union for Integration (BDI): the largest party among the Albanian population
- Alliance for Albanians (AS): conservatism; party comprising ethnic Albanians
- The Left: socialist
- Democratic Party of Albanians (DPA): ultra-nationalist, an ethnic party of Albanians
- BESA Movement: social conservatism
- Roma People's Party: party comprising ethnic Romani
- Turkish Democratic Party: centre, party comprising of ethnic Turkish.
Type of State
North Macedonia is a republic with a parliamentary democracy.
Executive Power
North Macedonia proclaimed its independence in 1991, at the time of the dissolution of the former Federal Social Republic of Yugoslavia. The country is a federal republic, its current constitution was adopted on November 20, 1991.
The executive power is formed by the President, elected by popular vote for a five-year term renewable once, and the Prime Minister. The leader of the majority party or majority coalition is generally elected Prime Minister by the Assembly and is in charge of forming the government.
Legislative Power
The legislative power is conducted by the Parliament (called Sobranie), the central instrument of the political system. It is unicameral and the assembly is composed of 120-140 members (currently 120) who are elected directly for a four-year term in multi-seat constituencies through closed-list proportional representation voting. Additionally, there is a potential for three members to be directly elected in diaspora constituencies through a simple majority vote, contingent upon adequate voter turnout.
 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
90/180
 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Partly Free
Political Freedom:
3/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

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COVID-19 Country Response

Travel restrictions
Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.
Import & export restrictions
A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
For the general overview of the key economic policy responses to the COVID-19 pandemic (fiscal, monetary and macroeconomic) undertaken by the government of North Macedonia, please consult the country's dedicated section in the IMF’s Policy Tracker platform.
Support plan for businesses
For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.

 

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Latest Update: May 2024