In 2015, Macedonia’s economy is expected to keep up its robust growth pace of 3.8%, according to forecasts of the World Bank, the European Bank for Reconstruction and Development, and the International Monetary Fund. Growth will be driven by government investments in civil engineering projects, as well as foreign investments in the manufacturing industry, rising exports and higher domestic demand.
Macedonia's gross domestic product (GDP) increased by 3.8% in 2014, above the average for Southeast Europe (SEE), backed by growing private consumption, strong industrial output, large-scale infrastructure investments, higher lending activity, expanding exports and bigger foreign direct investments (FDI). However, the country's economy continues to suffer from high unemployment, especially youth unemployment, deflation and large informal economy.
In terms of business-enhancing regulations, Macedonia managed to keep its leading position among the countries in the SEE region, according to the World Bank's Doing Business 2015 report. Macedonia occupied the 30th place out of 189 countries in the 2015 report, going up one place in comparison to the previous year's edition. Starting a business became easier after the government made online registration free of charge, strengthened minority investor protections, and made resolving insolvency easier, according to the report.
Macedonia also performed well in the Global Competitiveness Report 2014-2015 published by the World Economic Forum. The country ranked 63rd among 144 economies, while in the previous year's report it ended up 73rd out of 148 countries. The leading issues limiting Macedonia's competitiveness are access to financing, poor work ethic in national labour force, and inadequately educated workforce, the report showed.
Macedonian emigrants contributed 302.3 million euro in remittances to the country in 2014, down by 2.5%, according to the World Bank. Remittances accounted for more than 3.0% of Macedonia's GDP in 2014. Remittances by Macedonians living in the U.S., Germany, and Turkey made up 46.2% of the total.
Final consumption, which contributed 86.4% to the GDP, increased in value by 1.6% in 2014. Gross capital formation went up by 13.0%, contributing 26.8% to the GDP. Both imports and exports jumped - by 14.5% and 17.0%, respectively. The country's GDP totalled 407.049 billion denars in 2014.
The gross value added (GVA) generated by the national economy increased by nominal 3.4% in 2014 and totalled 348.069 billion denars. The agricultural sector registered an annual
rise of 2.0%, but cut its share in the GVA to 9.1%, from 9.2%. The industrial sector grew by 4.3% in terms of value and its share in the GVA structure increased to 14.9% from 14.7%. Construction expanded by 6.1%, thus slicing an 11.6% share in the country's GVA. The services sector recorded a 3.0% annual increase, adding up with a 64.5% share in the GVA.
Industrial output went up by 4.8% in 2014, according to the country's statistics institute. The manufacturing sector rose by 9.0%, while the electricity and gas supply, and the mining sectors fell by 14.2% and 1.9%, respectively. Manufacture of electrical equipment was the segment to report the highest annual production growth, of 30.1%, in 2014.
Macedonia registered an annual average deflation of 0.7% in 2014, compared to an inflation of 2.8% a year earlier. In 2014, the highest annual decrease in consumer prices, of 3.9%, was posted in recreation and culture, while the highest inflation, of 7.9%, was recorded by healthcare. Unemployment in Macedonia narrowed to 27.6% of the total labour force in the fourth quarter of 2014 from 28.7% a year earlier, according to official statistics. The unemployment rate among people aged 15 to 24 stood at 50.4% in the October-December 2014 period.
Broad money (money aggregate M4) increased by 10.5% year-on-year and reached 309.878 billion denars by December 2014, according to data provided by National Bank of the Republic of Macedonia (NBRM). The M2 money supply also grew, by 7.2% y/y, to 233.678 billion denars. Money aggregate M1, or narrow money, jumped by 22.2% y/y to 85.548 billion denars.
Loans to the non-government sector totalled 255.516 billion denars in the fourth quarter of 2014, up by an annual 9.8%, as household loans increased by 11.5% to 108.156 billion denars and loans to non-financial corporations rose by 8.6% to 147.360 billion denars. The country's gross external debt widened to 5.954 billion euro by the end of December, up by 14.1%, or 734 million euro, as compared to a year earlier. Long-term liabilities amounted to 4.660 billion euro or 78.3% of the total debt, and short-term liabilities added up to 1.294 billion euro, or 21.7% of the total.
The country's current account deficit narrowed to 9.715 million euro by the end of December from 58.069 million euro a year earlier, according to central bank data.
Foreign direct investment (FDI) increased by 4.0% to 262.335 million euro in 2014, according to NBRM. In 2014, Switzerland was the biggest foreign investor in Macedonia, contributing 126.637 million euro in FDI, followed by Saint Vincent and the Grenadines with 53.018 million euro and the U.K. d with 44.254 million euro.
In a breakdown by industries, financial intermediation, excluding insurance and pension funding, was attracted the largest amount of FDI, 49.177 million euro, followed by food products, beverages and tobacco products with 36.277 million euro, and motor vehicles, trailers and semitrailers with 26.742 million euro.
The trade deficit stoo totalled 407.049 billion denars d at 2.343 billion dollars in 2014, compared to 2.333 billion U.S. dollars in 2013, according to NBRM. Macedonia's most exported goods in 2014 were chemical products, which accounted for 17.6% of the total. In terms of imports, non-ferrous metals had the highest share, of 12.5%, of the total imports value.
Source: International Monetary Fund (IMF) World Economic Outlook Database – April 2015