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Macedonia’s Economy Sees Moderate Growth in 2017

IMF Projects 1.9% Real GDP Expansion

Skopje, Macedonia - According to the International Monetary Fund (IMF), the Former Yugoslav Republic of Macedonia’s economy is expected to experience moderate growth in 2017, with real GDP expansion projected at 1.9%.

Key Indicators Show Improvement

The IMF report highlights several key indicators that have shown improvement:

  • Foreign Currency Deposits: Foreign currency deposits, including local currency deposits indexed to FX, have increased slightly since end-2016, reflecting lingering effects of political uncertainty.
  • Gross Official Reserves: Gross international reserves have increased by €1.5 billion in the past year.
  • Total Short-term External Debt: Total short-term external debt has decreased by €500 million.

Household Deposits See Slight Increase

The report notes that households’ deposits saw a slight increase in foreign currency deposits, while domestic currency deposits remained stable.

Medium-Term Outlook Supports Growth

According to the IMF, Macedonia’s economic growth is expected to pick up in the medium term, supported by:

  • Stronger Investment and Credit Growth
  • Expansion of Export Capacity
  • Continued Improvement in Labor Markets

Risks to the Outlook

However, the report also notes that there are risks to the outlook, including:

  • Slim-Majority Governing Coalition: Reintroduction of political uncertainties could undermine confidence and investment.
  • External Downside Risks:
    • Weaker growth in partner countries
    • Global policy uncertainty
    • Banking sector links exposing Macedonia to possible financial volatility in Greece

Authorities Agree with IMF’s Outlook

The authorities have agreed with the IMF’s economic outlook and risks, noting that while there are near-term potential downside risks to confidence, they view external risks as contained due to a favorable economic outlook in major Euro area trading partners and limited spillovers from renewed financial volatility in Greece.

Conclusion: Structural Reforms Crucial

The report concludes that Macedonia needs to capitalize on its improved political stability by pushing for structural reforms in:

  • Labor Markets
  • Public Finances
  • Judiciary

These reforms will enhance EU accession prospects and growth potential.