Macroeconomic and fiscal indicators of North Macedonia

Economic growth has been strong in early 2023, but comes after slower economic growth in 2022 due to weaker private consumption and a larger drag from net exports[1].

Production growth had higher expectations but remained at the level of 1% year/year. Growth was driven by exports, while private consumption, investment and imports were weaker than expected.

Inflation remains a challenge, despite falling to 9.4 percent in 2023 from its peak of 14.4 percent in 2022.

Inflation fell faster than expected, with the slowdown in inflation meaning real wages are starting to gain ground again, rising by more than 10% in the final months of 2023.

Household consumption, boosted by remittances, remained resilient in the face of still high, albeit gradually moderating, annual inflation and significant monetary policy tightening (with the central bank’s key interest rate at 6.15 percent at the end of August 2023).

Pensions increased from March 2023 and a rise in the minimum wage came into effect from April. A €500 million Eurobond was issued in March 2023 and the EU provided a budget support grant of €80 million.

Real wage growth is likely to remain at the current status quo for some time, boosting consumption in the first half of 2024. This will be accompanied by the fiscal support package the government has announced ahead of parliamentary and presidential elections in April and May 2024.

Growth is likely to slow in the second half of the year as the fiscal support package, which includes temporary increases in pensions and various transfers for different groups of people, comes to an end.

Furthermore, there may be uncertainty about the formation of the new government and its future course, especially in relation to the constitutional changes required before the start of EU membership talks.

[1] https://www.imf.org/-/media/Files/Publications/CR/2024/English/1MKDEA2024001.ashx