North Macedonia overview

Economic growth stood at 2.1 per cent year on year in the first quarter of 2023, as a favourable net export position, driven by a decline in imports, was partly offset by a significant drop in investment. Industrial output remained muted, as a contraction in the manufacturing sector was balanced by strong electricity production. The current account deficit widened significantly in 2022 due to high prices of imported energy. In the first half of 2023, the current account came in at near balance, reflecting a lower trade deficit and robust remittance inflows. Household consumption, boosted by remittances, remained resilient in the face of still high, albeit gradually moderating, annual inflation (8.4 per cent in July 2023) and significant monetary policy tightening (with the central bank’s key interest rate at 6.15 per cent as of end-August 2023). Price caps on basic foodstuffs were imposed from April to June 2023. Pensions were increased effective from March and a hike in the minimum wage became effective from April. A €500 million eurobond was issued in March 2023, and the EU provided a budget support grant of €80 million. The first review of the ongoing Precautionary and Liquidity Line (PLL) arrangement with the IMF, initially envisaged for May 2023, had not yet taken place as of end-August. The €100 million in macro-financial assistance (MFA) by the EU, approved in June 2023, has not yet been disbursed as it is tied to satisfactory implementation of the IMF programme. Growth is forecast to remain modest at 2.0 per cent in 2023 as external demand is expected to remain sluggish and measures to contain inflation take their toll on household consumption. Output growth is set to accelerate to 3.0 per cent in 2024.