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publication April 18, 2019

New Country Partnership Framework for the Republic of North Macedonia

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Highlights

  • This document sets out the World Bank Group’s approach to supporting the reform agenda in North Macedonia for the period 2019–2023.
  • The objective of the Country Partnership Framework (CPF) is to boost the country’s ability to achieve faster, inclusive, and sustainable growth and provide its citizens with greater opportunities for a better life.
  • Three interconnected focus areas will help the country improve the environment for a dynamic private sector to enhance export-led growth, strengthen human capital, and build sustainability.

The resolution of the country’s name creates new opportunities for North Macedonia to accelerate sustainable and inclusive growth and revamp the European Union accession process, though structural challenges remain.

The historic resolution of the long-standing name dispute with Greece opens new opportunities to promote the development of a dynamic economy well integrated into the region and Europe more widely. North Macedonia will be able to capitalize on this renewed outlook by building on past reforms that have produced solid macroeconomic fundamentals, job creation, and an open economy that has attracted foreign investment.

However, the transition to a well-functioning and inclusive market economy is not yet complete.

Low and declining productivity of local firms, weak state institutions, and deficiencies in competition and investment policy and business regulation continue to pose serious structural challenges to economic growth. A competitive business legal framework has yet to translate into a vibrant private sector that can fully exploit the country’s location. The Government has limited fiscal space to continue to stimulate the economy, and there are risks to fiscal sustainability that need to be addressed. Educational achievement is insufficient and unequitable, limiting the availability of skills to meet the evolving demands of a modern economy, and creating inequality in access to economic opportunities. Finally, climate and environmental threats, including air pollution, require urgent attention. 

The objective of the CPF is to support North Macedonia’s ability to achieve faster, inclusive, and sustainable growth and provide its citizens with greater opportunities for a better life.

The CPF aims to support the Government’s program and medium-term strategy, which present a vision of accelerated economic growth with better employment opportunities, social cohesion and inclusion, and a plan to tackle the persistent bottlenecks. The CPF is also consistent with the Systematic Country Diagnostic analysis and recommendations.

The CPF is based on three interconnected focus areas that will help North Macedonia improve the environment for a dynamic private sector to enhance export-led growth, strengthen human capital for inclusive development, and build sustainability.

  1. Focus Area I aims to remove the bottlenecks that prevent the emergence of a dynamic and competitive private sector by improving connectivity and access to markets through activities that support “hard” and “soft” trade connectivity and strengthen local firms’ technological uptake, innovation, access to finance, and capacities.
  2. Focus Area II will support the development of human capital and skills to boost labor productivity and encourage more inclusive labor market participation. The CPF will also improve the quality and relevance of education, as well as the access to and quality of social services.
  3. Focus Area III will mitigate fiscal and environmental vulnerabilities to enhance sustainability by strengthening fiscal and public financial management and environmental sustainability by helping accelerate the transition to a more sustainable energy mix.