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. More efforts are still needed to generate economic growth and improve living standards for all.
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WASHINGTON, October 16, 2014 - The World Bank Group’s Board of Executive Directors today discussed a new Country Partnership Strategy (CPS) for FYR Macedonia for 2015-2018. The new Partnership Strateg... Show More +y is based on the Government’s development priorities and the World Bank Group’s twin goals of reducing poverty and boosting shared prosperity in a sustainable manner.The new strategy builds on the strength of the partnership between FYR Macedonia and the World Bank Group, which has been a steadfast support to the country in its development and aspiration to join the European Union. The country has a solid track record of prudent macroeconomic management and has been able to maintain growth and increase employment in the face of the global crisis. The new CPS will support the country in achieving higher and more inclusive growth that translates into jobs and rising income for all segments of society.The new CPS will make available up to US$400 million from the World Bank for the country for the four years of strategy implementation. Depending on market conditions, this could be supplemented by financing of US$80-100 million for four years from the International Finance Corporation (IFC), and guarantees from the Multilateral Investment Guarantee Agency (MIGA).The Country Partnership Strategy is defined around two pillars:Growth and Competitiveness – improvements in the business climate and the trade regime are essential to attract private investment and improve export performance in order to achieve sustained private sector led growth and job creation.Skills and Inclusion – interventions that increase skills and improve inclusion are crucial to ensure that all segments of society benefit from economic growth through greater employability and more efficient public and municipal services.FYR Macedonia aspires to European Union (EU) membership, and the new World Bank Group Strategy will promote progress on the accession agenda as a cross-cutting theme. The strategy is consistent with the new EU Assistance Country Strategy Paper for 2014-2020, and World Bank resources will be used to complement and improve absorption of the EU’s Instrument of Pre-Accession (IPA) funds. Overall, the World Bank Group will support the Government with a full range of financial, knowledge, and convening services, and provide assistance in several sectors, such as transport, energy efficiency, public financial management, and social protection.“Thanks to a strong track record of prudent management and structural reform the country has experienced solid growth, which is now increasing, and employment has begun to rise,” said Tatiana Proskuryakova, World Bank Country Manager for FYR Macedonia. “The challenge for the future is to build on this success and provide new opportunities to the poor and disadvantaged groups that have not as yet benefitted from economic growth as much as we would hope. The new World Bank Group strategy seeks to promote faster growth, but with better inclusion, so that all segments of society can benefit from job creation as the recovery accelerates.”IFC, a member of the World Bank Group, will continue to partner with clients through investments and advisory services in strategic sectors crucial to the country’s long-term sustainable development.“Further integration of the Macedonian economy into global production networks will accelerate its industry and trade competitiveness,” said Thomas Lubeck, IFC Regional Manager for the Western Balkans. “To achieve that objective, IFC will seek to make investments and provide advisory services to further improve collaboration between global and local partners and improve FYR Macedonia’s supply chain effectiveness.” FYR Macedonia became a shareholder and member of IFC in 1993. Since then, IFC's total investment in FYR Macedonia has totaled US$397 million in 29 projects across a variety of sectors.FYR Macedonia became a member of the World Bank in 1994. Since then, the World Bank invested US$1.7 billion in loans and grants through more than 40 operations, including investments in energy, roads, agriculture, health, social policy, innovation, skills, and other areas. The current World Bank investment portfolio consists of seven loans totaling US$369 million. Show Less -
* The World Bank Group comprises five institutions, including the International Bank for Reconstruction and Development (IBRD) and International Development Association (IDA), which together make up t... Show More +he World Bank; International Finance Corporation (IFC); and the Multilateral Investment Guarantee Agency (MIGA). Show Less -
Signs of recoverySome signs of hope show through in the region. Central and East European (CEE) countries are expected to see growth accelerate to 2.5 percent in 2014 and to 2.8 percent in 2015 – a si... Show More +gnificant improvement from the previous two years when growth was very modest (0.8 percent in 2012 and 1.3 percent in 2013). But recovery in the new EU member states remains mixed and growth in Western Europe is disappointing.Unemployment rates in several countries have peaked and are now showing signs of improvement. While they remain above 10 percent in several CEE countries, they are declining the most in countries such as Estonia, Latvia, and Lithuania, where structural reforms and prudent policies were implemented swiftly. Given past trends, these positive developments are expected to be reflected in higher income growth for the bottom 40 percent of the population.In the Western Balkans, economic growth is expected to drop from 2.4 percent in 2013 to only 0.6 percent in 2014, due to its debt overhang that is reducing financing for business and lack of reform momentum, and then recover modestly to a projected 1.9 percent in 2015. Ukraine crisisMeanwhile, in Ukraine, geo-political tensions have developed into a deep crisis for the country. Recent trends point to a sharper decline in Ukraine’s real GDP in 2014 and continued retrenchment in 2015 compared to earlier projections. Ukraine’s GDP is expected to contract 8 percent in 2014 and 1 percent in 2015.The conflict in the east has disrupted economic activity, made collection of taxes difficult, adversely affected exports, and hurt investor confidence. Meanwhile, weak revenue performance, rising spending pressures, and a growing Naftogaz deficit make fiscal adjustment more challenging. The current account deficit has adjusted because of the sharp depreciation, but balance of payments pressures remain high due to large external debt refinancing needs, low FDI, and limited access to external financing. A prolonged confrontation in the east, constrained credit supply due to risks in the banking sector, constrained domestic consumption, and investment demand all pose risks and affect prospects for recovery.Russian stagnationIn Russia, the World Bank warned earlier this year of an unfinished transition, including ongoing problems in the business environment and heavy reliance on oil revenues. Currently, the Russian economy is slowing as its past growth drivers have weakened. GDP growth in Russia was just 0.8 percent in the first half of 2014, compared to 0.9 percent in the first half of 2013.Economic activity was already hamstrung in 2013 by lingering structural problems and a wait-and-see attitude on the part of both businesses and consumers. An additional negative impact on the economy – besides slow structural reforms – came from increased geopolitical tensions and an uncertain policy environment. It is policy uncertainty about the economic course the country will take that is casting the longest shadow on Russia’s medium-term prospects. There is a greater need for reforms to enhance the business climate to build avenues for growth and less reliance on the energy sector.The Commonwealth of Independent States (CIS) economies have faced headwinds due to the crisis in Ukraine and ongoing stagnation in Russia, however broad spill-overs to other countries have been limited so far. Immense reliance of the CIS economies on energy exports persists, and progress on structural reforms has slowed. Growth for these countries is expected to be a meager 1 percent in 2014 and to rise only slightly to 1.3 percent in 2015.In Turkey, growth has also slowed from over 4 percent in 2013, but is projected to stabilize at about 3.5 percent in 2014 and 2015.Going forward“The forecast for the Emerging Europe and Central Asia region remains tepid because of deferred structural reforms, as well as ongoing weak growth in Western Europe and stagnation in Russia,” noted Hans Timmer, Chief Economist in the World Bank’s Emerging Europe and Central Asia region. “Economic growth in the region remains lower than in most other regions of the world. Going forward, the emphasis should be on improving governance and the investment climate, strengthening competitiveness, ensuring the stability of the financial sector, and maintaining a sound macroeconomic framework.”“To be sustainable in the longer term, economic growth and shared prosperity need to be fiscally affordable, environmentally responsible, and conducive to social inclusion,” said Timmer.The World Bank, working jointly with other World Bank Group institutions, is helping its client countries in Emerging Europe and Central Asia address these and other challenges to reduce poverty and boost shared prosperity through policy dialogue, analytical work, project funding, and reimbursable advisory services.-----------------------------------------------------------------------------------Watch the video: Press Briefing - Regional Economic Update Show Less -