Economy of North Macedonia

The economy of North Macedonia has become more liberalized, with an improved business environment, since its independence from Yugoslavia in 1991, which deprived the country of its key protected markets and the large transfer payments from Belgrade. Prior to independence, North Macedonia was Yugoslavia's poorest republic (only 5% of the total federal output of goods and services). An absence of infrastructure, United Nations sanctions on its largest market (the Federal Republic of Yugoslavia), and a Greek economic embargo hindered economic growth until 1996.

Worker remittances and foreign aid have softened the subsequent volatile recovery period. The country's GDP has increased each year except in 2001, rising by 5% in 2000. However, growth in 1999 was held down by the severe regional economic dislocations caused by the Kosovo War.

Successful privatization in 2000 boosted the country's reserves to over $700 million. Also, the leadership demonstrated a continuing commitment to economic reform, free trade, and regional integration. The economy can meet its basic food, coal and hydroelectric power needs but depends on outside sources for all of its petroleum and natural gas and most of its modern machinery and parts. Inflation jumped to 11% in 2000 largely due to higher oil prices, but the currency has calmed since the exchange rate was normalised when the EU Stabilization and Association Agreement entered into force in 2004.

North Macedonia experiences one of Europe's biggest growth rates at an average of 4% (even during the political crisis) making it comparable to nations such as Romania and Poland.

History

North Macedonia's economy has almost always been completely agricultural in nature from the beginning of the Ottoman Empire when it was part of the District of Üsküp and Province of Salonika. It concentrated on pasture farming and vineyard growing. Opium poppy, introduced into the region in 1835, became an important crop as well by the late 19th century, and remained so until the 1930s.

The role of industry in the region's economy increased during the industrial age. The geographical region of Macedonia was responsible for large outputs of textiles and several other goods in the Ottoman Empire. However, outdated techniques to produce the goods persisted. The stagnation of the regional economy began under the rule of the Kingdom of Serbia.

When World War II ended, the local economy began to experience revitalization by way of subsidies from Federal Belgrade. The subsidies assisted North Macedonia to redevelop its "lost" industry and shift its agricultural-centered economy to an industry-centered economy with new hearts of industry emerging all over the country in Veles, Bitola, Štip and Kumanovo. Previously, Skopje was the only industrial centre in North Macedonia, this expanded to several other cities during Socialist Yugoslavia.

After the fall of Socialist Yugoslavia, the economy experienced several shocks that damaged the local economy. Starting with the Western embargo on the Yugoslavian common market, and ending with the Greek embargo on North Macedonia over the country's former name, Republic of Macedonia. The economy began to recover in 1995 and experienced a full recovery after the 2001 insurgency by ethnic Albanians. North Macedonia's GDP grew by an average of 6% annually until the financial crisis of 2007–2008 when its economy contracted. The crisis had little impact on the country. North Macedonia today maintains a low debt-to-GDP ratio and is experiencing a revitalized investment interest by companies from Turkey, Algeria, Albania, and others.

Economic Activity

North Macedonia is vulnerable to economic developments in Europe - due to strong banking and trade ties - and dependent on regional integration and progress toward EU membership for continued economic growth. At independence in September 1991, North Macedonia was the least developed of the Yugoslav republics, producing a mere 5% of the total federal output of goods and services. The collapse of the Socialist Federal Republic of Yugoslavia ended transfer payments from the central government and eliminated advantages from inclusion in a de facto free trade area. An absence of infrastructure, UN sanctions on the downsized Yugoslavia, and a Greek economic embargo over a dispute about the country's constitutional name and flag hindered economic growth until 1996. Since then, North Macedonia has maintained macroeconomic stability with low inflation, but it has so far lagged the region in attracting foreign investment and creating jobs, despite making extensive fiscal and business sector reforms. Official unemployment remains high at 24.6% (2015, Q4), but may be overstated based on the existence of an extensive gray market that is not captured by official statistics. In the wake of the global economic downturn, North Macedonia has experienced decreased foreign direct investment, lowered credit availability, and a large trade deficit. However, as a result of conservative fiscal policies and a sound financial system, in 2010 the country credit rating improved slightly to BB+ and was kept at that level in 2011. Macroeconomic stability has been maintained by a prudent monetary policy, which keeps the domestic currency pegged against the euro. As a result, GDP growth was modest, but positive, in 2010 and 2011, and inflation was under control. Latest data from North Macedonia's State Statistical Office show that overall, output for 2012 dropped by 6.6 percent compared to 2011.

As of 2020, the country had signed free trade agreements with the CEFTA, the Stabilization and Association Agreement with the European Union, the EFTA with Switzerland, Norway, Iceland, and Liechtenstein, and bilateral agreements with Turkey and Ukraine.

Free Economic Zones

In a bid to attract more interest from domestic and foreign investors after 2000 the government has pursued a Free Economic Zone (FEZ) policy, in which more than a dozen geographically disparate FEZs have sprouted. One benefit is a tax holiday for 10 years. The social contribution rate hovered at approximately 30% for the five-year period to 2019.

Agriculture

North Macedonia produced in 2020:

* 318,000 tons of grape;
* 246,000 tons of wheat;
* 205,000 tons of bell pepper;
* 193,000 tons of potato;
* 168,000 tons of cabbage;
* 155,000 tons of tomato;
* 150,000 tons of maize;
* 148,000 tons of barley;
* 125,000 tons of watermelon;
* 106,000 tons of apple;
* 63,000 tons of onion;
* 49,000 tons of cucumber

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