In the last eight years, the Macedonian economy has gone
through notable structural changes, with major reforms
undertaken, bringing new foreign companies into the economy and
reshaping the export sector. Concomitantly, a stronger public
investment cycle has provided impetus to investments and
growth. Both processes emerged when the global crisis struck,
which helped build the resilience of the economy against the
crisis. This also enabled solid growth thereafter, on average
close to 3%. Given these growth rates, the current level of GDP
exceeds the pre-crisis maximum by around 20%.
Dissimilar to the pre-crisis period when growth was mostly
consumption driven, in the post-crisis period, exports and
investments have been major growth drivers. Hence, significant
positive structural shifts have occurred, with the share of
investments and exports of GDP increasing markedly. Last year
was an exception in terms of investment growth, as due to
peculiar domestic political conditions, investments plunged
The latest medium-term economic outlook envisages a stable
political context and protraction of favourable trends, with
growth rates assumed to hover in the range of 3% to 3.5%, or
close to the potential.
Given the small size and the openness of the economy, one of
the important assumptions in the forecast is the external
environment, which is assessed to be growth conducive, with
further recovery among our main trading partners. A further
rise of the activity of foreign investors, as well as the entry
of new companies into the market, are also assumed to support
the growth and competitiveness of the economy. The forecast
assumes the revival of the public investment cycle, which in
confluence with private investment will enable strong
contribution of investment.
In a stable environment, we expect the continuation of a
trend of steadily increasing employment and income in the
labour market, which will support consumer spending. Overall,
an export-led growth model supported by strong investments is
expected to prevail. This is an inevitable prerequisite for a
faster real convergence and productivity catch-up for a small
and open economy.
In the context of the medium-term outlook, there are several
points which should be accentuated as important challenges. One
of them is the maintenance of an environment conducive to the
further entry of new multinational companies, which will enable
the economy's stronger integration into global supply chains.
There is currently a dearth of strong production-line linkages
between foreign companies and domestic suppliers, but this is
an important precondition for a stronger spill-over from
foreign investments into the domestic economy. Furthermore,
Macedonia also needs a shift towards sectors with higher levels
of technological sophistication, as a precondition for more
efficient and innovative growth.
All this requires additional and innovative sources of
financing, which in the Macedonian context would mean more
developed financial markets and more diversification in
financial instruments. Lastly, it is important to deal with
certain segments of the economy that are still poorly ranked,
such as governance, quality of institutions and human capital.
All of this, should enable stronger and sustainable growth, and
the improved competitiveness of the economy.