Macedonia gained its independence peacefully from Yugoslavia in 1991. Greek objection to Macedonia’s name, insisting it implies territorial pretensions to the northern Greek province of the same name, and democratic backsliding have stalled the country’s movement toward Euro-Atlantic integration. Immediately after Macedonia declared independence, Greece sought to block Macedonian efforts to gain UN membership if the name “Macedonia” was used. Macedonia was eventually admitted to the UN in 1993 as “The Former Yugoslav Republic of Macedonia,” and at the same time it agreed to UN-sponsored negotiations on the name dispute. In 1995, Greece lifted a 20-month trade embargo and the two countries agreed to normalize relations, but the issue of the name remained unresolved and negotiations for a solution are ongoing. Since 2004, the US and over 130 other nations have recognized Macedonia by its constitutional name, Republic of Macedonia. Ethnic Albanian grievances over perceived political and economic inequities escalated into an insurgency in 2001 that eventually led to the internationally brokered Ohrid Framework Agreement (OFA), which ended the fighting and established guidelines for constitutional amendments and the creation of new laws that enhanced the rights of minorities. Relations between Macedonians and ethnic Albanians remain fragile, however.
Southeastern Europe, north of Greece
low-grade iron ore, copper, lead, zinc, chromite, manganese, nickel, tungsten, gold, silver, asbestos, gypsum, timber, arable land
Population - distribution
a fairly even distribution throughout most of the country, with urban areas attracting larger and denser populations
Macedonian (official) 66.5%, Albanian 25.1%, Turkish 3.5%, Romani 1.9%, Serbian 1.2%, other 1.8% (2002 est.)
SKOPJE (capital) 503,000 (2015)
- Conventional long form
- Republic of Macedonia
- Conventional short form
- Local long form
- Republika Makedonija
- Local short form
- Geographic coordinates
- 42 00 N, 21 26 E
- Time difference
- UTC+1 (6 hours ahead of Washington, DC, during Standard Time)
- Daylight saving time
- +1hr, begins last Sunday in March; ends last Sunday in October
has not submitted an ICJ jurisdiction declaration; accepts ICCt jurisdiction
Since its independence in 1991, Macedonia has made progress in liberalizing its economy and improving its business environment. Its low tax rates and free economic zones have helped to attract foreign investment, which is still low relative to the rest of Europe. Corruption and weak rule of law remain significant problems. Some businesses complain of opaque regulations and unequal enforcement of the law.
- External debt stocks
- US$ 6,942,079,000
- Total tax rate (% of commercial profits)
- Real Interest Rate
- Manufacturing, value added (% of GDP)
- Current Account Balance
- US$ -341,165,352
- Labor Force, Total
- Employment in Agriculture
- Employment in Industry
- Employment in Services
- Unemployment Rate
- Imports of goods and services
- US$ 6,953,629,769
- Exports of goods and services
- US$ 5,367,444,081
- Total Merchandise Trade
- FDI, net inflows
- US$ 573,060,169
- Commercial Service Exports
- US$ 1,594,168,718
grapes, tobacco, vegetables, fruits; milk, eggs
food processing, beverages, textiles, chemicals, iron, steel, cement, energy, pharmaceuticals, automotive parts
- foodstuffs, beverages, tobacco; textiles, miscellaneous manufactures, iron, steel; automotive parts
- Germany 33.2%, Kosovo 11.5%, Bulgaria 5.1%, Greece 4.5% (2015)
- machinery and equipment, automobiles, chemicals, fuels, food products
- Germany 15.9%, UK 13.6%, Greece 10.9%, Serbia 8.7%, Bulgaria 6.7%, Turkey 5.5%, Italy 4.7% (2015)
- Country Risk Rating
- A very uncertain political and economic outlook and a business environment with many troublesome weaknesses can have a significant impact on corporate payment behavior. Corporate default probability is high.
- Business Climate Rating
- The business environment is mediocre. The availability and the reliability of corporate financial information vary widely. Debt collection can sometimes be difficult. The institutional framework has a few troublesome weaknesses. Intercompany transactions run appreciable risks in the unstable, largely inefficient environments rated B.
- Integrated into the German production chain
- Proximity to Central European factories
- Wage competitiveness
- Support from international donors
- High levels of expatriate workers' remittances (19% of GDP)
- Peg of the denar to the euro
- High level of structural unemployment and training shortfalls
- Large informal economy
- Inadequate transport infrastructures
- Significant indebtedness of private sector (93% of GDP at end of 2014)
- Conflicting political landscape
- Tensions between the Slavic majority and the Albanian minority
- Negotiations to join the EU and NATO linked to dispute with Greece over the name of the country
Economic activity decelerated in 2016, under the effect of political instability which affected investors. Although reliant on political stabilization, growth should increase in 2017. Its main driver could be public investment. In fact, it has registered an upturn, due to road infrastructure projects. Thus, the industrial and construction sectors should benefit from this dynamic. Furthermore, the farming sector should recover from flooding of the summer 2016.
Private consumption should retain its dynamism. It should be favored by employment, even though the subsidized public jobs programs could experience a slight downturn after the expected elections. Furthermore, inflation should rise slightly, in line with the moderate rise in commodities. In addition, corporate investment, particularly from foreign firms, will remain dependent on the normalization of the political situation.
Finally, exports of car components (cables, electronic circuits), chemical products, plastics, textiles and clothing, construction materials, food grade glass, will feel the benefits of moderate growth in Europe. As imports will rise at the same time because of stronger domestic demand, the contribution from trade to growth should remain fairly weak.
In 2016, the government had to revise public expenditure upwards, because of the floods. Although fiscal consolidation is looming in 2017, the budget balance should remain in deficit. Revenues are burdened by tax evasion, the scale of the informal economy and a unique income and corporation tax rate of 10%. On top of this, with the aim of attracting in and retaining foreign investment, these investors are offered 10-year tax exemptions and free access to public services. 80% of public expenditure is for wages, pensions, social security transfers and debt interest and therefore offer little flexibility. The recurring deficit and loans contracted by nationalized companies for the construction of infrastructures are at the origin of the high and growing level of indebtedness, and mainly denominated in euros. Nevertheless, the government is committed to complying, as of the beginning of 2017, with extremely ambitious deficit and indebtedness ceilings of 3% and 60% respectively. However, the budget target seems difficult to achieve.
Although structurally in deficit, the trade balance should improve. Exports by foreign-owned companies located in the country should increase due to the consolidation of their production capacities and the upturn in demand from the Eurozone, providing a counterweight to the rise in the value of imports (rise in the energy bill). Expatriate workers' remittances, the balance of services surplus and, to a lesser extent, spending by visitors from Turkey, Bulgaria and other European countries cover in part the trade deficit. Overall, the current account deficit should diminish in 2017.
Despite the rise in exports by foreign owned companies located in the country, the balance of trade remains largely in deficit, at the level of 22% of GDP. This is due to the scale of imports associated with investments, in particular public, as well as buoyancy of internal demand. Remittances from expatriate workers (19% of GDP) and, to a lesser extent, spending by visitors from Turkey, Bulgaria and other European countries cover approximately 95% of the trade deficit. Foreign direct investments account for around 3% of GDP. External debts amount to almost 70% of GDP and are rising because of the external commitments of the public sector and loans linked with foreign direct investments. The exchange rate risk has been limited by pegging the denar to the euro, which has been firmly defended by monetary authorities.
The coalition in power since 2006 including the Christian-Democrats of VRMO-DPMNE and DUI, the largest Albanian minority party, was re-elected on the 11th of December 2016 during the early legislative elections. Those were provoked by the broadcasting of audio recordings in spring 2015 implicating members of the coalition in corruption and election fixing, followed by demonstrations by the Albanian community during which 22 people died. The United States and the European Union reacted quickly. A settlement was agreed in July 2015, including the appointment of a special prosecutor with a team and responsibility for investigating the recordings, the ending of the parliamentary boycott by the opposition and the holding of early elections. However, the coalition should only have a tenuous majority (61 seats out of 120), thus reducing their room for maneuver against the opposition lead from Social-Democrats from SDSM. Furthermore, the country will remain confronted with a number of challenges, including the migratory crisis, the increasing ethnic polarization in the society and the process of joining the European Union and NATO. Athens refuses to accept its neighbor being called Macedonia, a name that is also that of a Greek region. This situation is leading to caution among investors. Whilst within the Industrial and Technology Development Zones (duty-free areas), foreign companies enjoy significant fiscal benefits and low labor costs, they are faced with a shortage of skilled labor, inadequate infrastructures, insufficient resources allocated to R&D, the slowness of internal payments and of the legal system, as well as corruption. The businesses of foreign companies, the origin of the majority of exports, hardly benefit to local entrepreneurial fabric which remains relatively underdeveloped.