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

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

North Macedonia is the poorest of the former Yugoslav republics; however, it has made significant progress in expanding its economy over the past decade. The economy grew on average 5% annually between 2004 and 2008, driven mainly by domestic consumption and exports (notably metals and textile products). The COVID-19-induced crisis, however, prompted a GDP drop of 4.5% in 2020. However, the economy rebounded in 2021, with GDP marking a growth of 4% according to IMF estimates, supported by private consumption and foreign remittances. For 2022 and 2023, growth should stabilize around 4.2% and 3.8%, respectively, though uncertainty remains due to the unstable global conjuncture. With the ongoing restoration of global supply chains and recovery of demand from the German automotive sector, export growth is expected to accelerate sharply.

Public finances were also severely affected by the pandemic, with support measures accounting for about 9% of expected full-year GDP. The overall government deficit was thus estimated at 6.1% in 2021, with an increase of 100% in capital expenditure compared to the 2020 budget). The government plans to reduce the central government fiscal deficit to 3.5% by 2023, although the European Commission forecasts a deficit of 4.9% this year followed by 4.3% in 2023. General government debt – estimated at 53% in 2021 - is projected to rise further at least until 2023, yet to remain below 60% of GDP (at 54.8% as per the IMF latest forecast). Meanwhile, inflation accelerated in 2021 reaching 3.1%, largely due to an increase in energy, food and transportation costs. The IMF expects the rate to follow a downward trend this year (2.2%) and the next (1.5%). While EU accession talks have been blocked by Greece due to a historic dispute over the name of the country, both the EU and Greek authorities praised the decision of the North Macedonian parliament to change it to the Republic of North Macedonia. In March 2020, the General Affairs Council of the EU decided to open accession negotiations with North Macedonia, and in July 2020 the draft negotiating framework was presented to the Member States. Nevertheless, in November the Bulgarian government officially announced that it does not approve the EU negotiation framework for North Macedonia’s accession process and thus practically blocked the country’s membership process over slow progress on the implementation of the 2017 Friendship Treaty between the two countries. In 2021, the EU’s General Affairs Council stated it expects the start of long-awaited EU accession talks with Albania and North Macedonia to happen “as soon as possible”, without the indication of a possible date.

Unemployment – estimated at 15.9% in 2021 by the IMF – is still really high and was exacerbated by the COVID-19 crisis. Thanks to the firming recovery and continued government support to employers, employment growth is expected to pick up over the forecast horizon, with the unemployment rate declining to 15.6% in 2022 and 15.3% next year (IMF). 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 income ratio between the richest and poorest 20% of the population is more than eight times, the highest in the EU.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 12.5512.2913.8914.9015.91
GDP (Constant Prices, Annual % Change) 3.2-4.54.04.23.8
GDP per Capita (USD) 6,0445,939e6,7127,2047,692
General Government Gross Debt (in % of GDP) 40.651.3e53.054.054.8
Inflation Rate (%) 0.81.2e3.12.21.5
Unemployment Rate (% of the Labour Force) 17.316.415.915.615.3
Current Account (billions USD) -0.42-0.43-0.29-0.31-0.34
Current Account (in % of GDP) -3.3-3.5-2.1-2.1-2.2

Source: IMF – World Economic Outlook Database , October 2021

Note: (e) Estimated Data

Main Sectors of Industry

The Republic of North Macedonia (formerly known as FYROM) has been traditionally based on agriculture. The agricultural sector represents 9.1% of the GDP and employs 13.9% 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 – USD 106 million in 2021 - consists of direct payments for agriculture production and rural development). Arable agricultural land accounts for half of the total territory, of which about two-thirds is categorised as pastures and the rest as arable agricultural land. The country mainly produces grapes, tobacco, vegetables and fruits. Sheep and goat breeding is equally important. There are a few deposits of iron, copper and lead in the country. One of the limits of the sector is that parcels are very small and fragmented, with over half of parcels consisting of two to five hectares, and only 0.14% with 50 hectares or more.

The industrial sector represents 22.6% of the GDP and employs 31.1% of the active population. It includes chemical products, steel, machinery and textiles. The textile sector constitutes the main industry of the country (especially the leather industry), with the textile production output being close to an all-time high in the last two decades. The manufacturing sector alone contributes 12.5% of the GDP (World Bank). According to data from the country’s statistical office, in 2021 North Macedonia's industrial production rose by 1.4% year-on-year.

The tertiary sector represents 57% of the GDP and employs 55% of the total workforce. The main income sources come from transport, telecommunications and energy production. The North-Macedonian 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 2021 the number of foreign tourists who visited North Macedonia reached 293,963, compared with 118,206 the year earlier (national statistical office).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 13.9 31.1 55.0
Value Added (in % of GDP) 9.1 22.6 57.0
Value Added (Annual % Change) 1.7 -6.8 -2.6

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

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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 129.1% (World Bank, latest data available). The country mainly exports reaction initiators and accelerators (20%), centrifuges (11.7%), and insulated wires (8.6%); importing platinum (13%), ceramic wares (4.3%), and petroleum oils (4.1%).

In 2020, its main export partners were Germany, which accounted for almost half of total exports alone (47.2%), Serbia (7.9%), Bulgaria (4.7%), and Greece (3%); with the main import origins being the United Kingdom (15.6%), Germany (10.7%), Serbia (7.8%), and China (6.9% - data Comtrade).

North Macedonia became a member of the WTO (World Trade Organisation) in April 2003. Following a cooperation agreement with 22the EU, North Macedonia signed a Stabilisation and Association Agreement in April 2001, 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 as the antechamber of the EU.

North Macedonia's trade structure has been traditionally in deficit, however, the gap between imports and exports had been gradually decreasing in recent years. In 2020, the country exported goods worth USD 6.6 billion – a 7.7% decrease compared to the previous year – importing USD 8.7 billion (-8%). With regard to services, North Macedonia exported USD 1.6 billion of commercial services, importing USD 1.1 billion (data by WTO). The World Bank estimates the country’s 2020 overall trade deficit at 12.8% of GDP.
 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 2021 amounted to USD 8.1 billion, a 19.7% increase compared to the same period one year earlier; whereas the value of imported goods stood at USD 11.4 billion, 26.8% more year-on-year. In the same year Germany, Great Britain, Serbia, Greece and China were the most important trade partners.

 
Foreign Trade Indicators 20162017201820192020
Imports of Goods (million USD) 6,7577,7239,0509,4718,710
Exports of Goods (million USD) 4,7875,6686,9117,1896,635
Imports of Services (million USD) 1,1561,1831,3971,4181,118
Exports of Services (million USD) 1,5981,6281,8541,8211,643
Imports of Goods and Services (Annual % Change) 11.15.29.110.5-10.5
Exports of Goods and Services (Annual % Change) 9.18.315.64.6-10.9
Imports of Goods and Services (in % of GDP) 65.569.072.876.570.9
Exports of Goods and Services (in % of GDP) 50.755.160.462.358.1
Trade Balance (million USD) -2,009-2,014-2,055-2,205-2,066
Trade Balance (Including Service) (million USD) -1,631-1,588-1,612-1,813-1,579
Foreign Trade (in % of GDP) 116.2124.1133.2138.8129.1

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

 

Main Partner Countries

Main Customers
(% of Exports)
2020
Germany 47.2%
Serbia 7.9%
Bulgaria 4.7%
Greece 3.0%
Hungary 3.0%
See More Countries 34.3%
Main Suppliers
(% of Imports)
2020
United Kingdom 15.6%
Germany 10.7%
Serbia 7.8%
China 6.9%
Greece 5.9%
See More Countries 53.2%

Source: Comtrade, Latest Available Data

 
 

Main Products

6.6 bn USD of products exported in 2020
Reaction initiators, reaction accelerators and...Reaction initiators, reaction accelerators and catalytic preparations, n.e.s. (excl. rubber accelerators) 20.0%
Centrifuges, incl. centrifugal dryers (excl. those...Centrifuges, incl. centrifugal dryers (excl. those for isotope separation); filtering or purifying machinery and apparatus, for liquids or gases; parts thereof (excl. artificial kidneys) 11.7%
Insulated incl. enamelled or anodised wire, cable...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 8.6%
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) 3.6%
Ferro-alloysFerro-alloys 3.4%
See More Products 52.7%
8.7 bn USD of products imported in 2020
Platinum, incl. palladium, rhodium, iridium,...Platinum, incl. palladium, rhodium, iridium, osmium and ruthenium, unwrought or in semi-manufactured forms, or in powder form 13.0%
Ceramic wares for laboratory, chemical or other...Ceramic wares for laboratory, chemical or other technical uses; ceramic troughs, tubs and similar receptacles used in agriculture; ceramic pots, jars and similar articles used for the conveyance or packing of goods (excl. millstones, polishing stones, grindstones and the like of heading 6804; refractory ceramic goods; household articles; containers for shops; electrical devices, insulators and other insulating fittings) 4.3%
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 4.1%
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 2.9%
Insulated incl. enamelled or anodised wire, cable...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 2.3%
See More Products 73.4%

Source: Comtrade, Latest Available Data

 
 

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Main Services

0.0 bn USD of services exported in 2018
44.79%
28.74%
18.45%
3.28%
2.59%
1.14%
0.66%
0.34%
0.0 bn USD of services imported in 2018
34.39%
22.46%
17.21%
10.92%
5.64%
3.56%
2.37%
1.89%
0.87%
0.70%

Source: United Nations Statistics Division, Latest Available Data

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Political Outline

Current Political Leaders
President: Stevo PENDAROVSKI (since 12 May 2019)
Prime Minister: Dimitar KOVACEVSKI (since 16 January 2022)
Next Election Dates
President: 2024
Legislative: 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 includes Slavo-Macedonians, while the minorities are Albanian. 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. Leader of the centre-right coalition (Renewal)
- Democratic Union for Integration (DUI): the largest party among the Albanian population
- Alliance for Albanians (AA): conservatism; party comprising of 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 of 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 Sobraine), the central instrument of the political system. It is unicameral and the assembly is composed of 120-140 members (currently 120) who are elected every four years by direct popular vote.
 

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

Source: World Press Freedom Index, Reporters Without Borders

 

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

COVID-19 epidemic evolution

To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in North Macedonia, please visit the portal Koronavirus.gov.mk with the official data, including the geographical and age distribution of the epidemic. The National Institute of Public Health publishes daily updates.
For the international outlook you can consult the latest
situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.

Sanitary measures

To find out about the latest public health situation in North Macedonia and the current sanitary measures in vigour, please consult the website of the government Vlada.mk, including the up-to-date information on the containment measures put in place and public health recommendations. Further information and news are available on the official portal Koronavirus.gov.mk and on the website of the Ministry of Health (in Macedonian).

Travel restrictions

The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.

The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.

Import & export restrictions

For the information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the portal of the Customs Administration. The national government decided to ban the export of wheat and flour, as well as introducing export quotas for protective masks.
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to North Macedonia on the
International Trade Centre's COVID-19 Temporary Trade Measures webpage.

Economic recovery plan

To know about the economic measures taken by the government of North Macedonia to address the impact of the COVID-19 pandemic on the national economy, please visit the dedicated section on the official portal Koronavirus.gov.mk. Further information can be found on the websites of the Ministry of Economy and Ministry of Labour and Social Policy (in Macedonian). The website of KPMG provides an overview of the measures.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the North Macedonian government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to North Macedonia in the IMF’s Policy Tracker platform.

 

Support plan for businesses

For the information on the local business support scheme and taxation measures established by the government of North Macedonia to help businesses to deal with the economic impacts of the COVID-19 epidemic on their activity, please consult the official portal Koronavirus.gov.mk and the website of the Ministry of Economy.
For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the World Bank's Map of SME-Support Measures in Response to COVID-19.

Support plan for exporters

To find out about the support plan for exporters put in place by the government of North Macedonia, please consult the dedicated page on the official portal Koronavirus.gov.mk – “Support for maintaining economic activities and export” (in Macedonian).

 

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