The Former Yugoslav Republic (FYR) of Macedonia is an upper middle-income country that has made great strides in reforming its economy over the last decade. The country has made significant development achievements, but more efforts across a range of areas are still needed to generate economic growth that puts people to work in the country and improves living standards for all. The government and the World Bank Group are currently working on boosting competitiveness while generating an environment for local businesses that will be necessary for putting Macedonia on a sustainable growth path, create more and better jobs, and promote shared prosperity. Policies to improve educational outcomes and other public services and to remove labor market constraints will be needed to support growth and make sure that a large part of the population reaps the benefits of sustained growth.
After declining by 0.4% in 2012, real GDP grew by 3.1% in 2013 on the back of construction and exports. Real GDP growth is expected to reach 3% in 2014.
FYR Macedonia’s central government and public sector debt in terms of GDP remained moderate at 35.8% of GDP and 43.2%, respectively, in 2013. While the central government debt is projected to remain stable, public sector debt is set to rise rapidly - reaching 49% by 2016 as State Owned Enterprises will account for a significant share of investment spending.
The government published a medium-term fiscal framework in September of 2013 which foresees a decline of the government deficit in the medium term from 4.1% in 2013 to 3.5% in 2014, 3.2 in 2015, and 2.6% in 2016. In 2013, FYR Macedonia was once again ranked among the top reformers worldwide according to the Doing Business report and accession to the European Union (EU) nonetheless continues to be an anchor for reform in nearly every area of the government. The authorities are harmonizing national legislation with the EU acquis communautaire and have made specific achievements in procurement, transport policy, customs union, taxation, and statistics.
Overall, legislation is aligning the country’s policies closer with the EU but further work is essential for the enhancement of administrative capacity for legislation implementation and enforcement. In March 2012, the country and the EU Commission initiated a High Level Accession Dialogue (HLAD) which focused on five key policy areas:
- Freedom of expression in the media
- Rule of law
- Public administration reform
- Electoral reform
- Strengthening the market economy
In December 2013, the EU General Affairs Council adopted the conclusion for the Summit of the European Council regarding the EC’s proposal for start of accession negotiations with the country, concluding that the EU members-states will revert to the issue in 2014.
The current investment portfolio of World Bank-financed operations in FYR Macedonia consists of 6 projects, totaling $300 million.