CAPITAL Skopje
POPULATION (MILLION) 2,1
GDP (CURRENT USD BILLION) 12,69
GDP PER CAPITA (CURRENT USD) 6,08
LIFE EXPECTANCY (YEARS) 75,59

HISTORY

Macedonia gained its independence peacefully from Yugoslavia in 1991. Although Macedonia became an EU candidate in 2005, it has not opened accession negotiations. The country still faces challenges, including fully implementing reforms to overcome a decade of democratic backsliding and stimulating economic growth and development. In June 2018, Macedonia and Greece signed the Prespa Accord whereby the Republic of Macedonia agreed to change its name to the Republic of North Macedonia. Following ratification by both countries, the agreement went into force on 12th February 2019. North Macedonia signed an accession protocol to become a NATO member state in February 2019 and joined the alliance 27.03.20. The negotiations for becoming an EU memeber are likely to begin in Fall 2020.

Politics in North Macedonia occur within the framework of a parliamentary representative democratic republic, whereby the Prime Minister is the head of government, and of a multi-party system. Executive power is exercised by the government. Legislative power is vested in both the government and parliament. The Judiciary is independent of the executive and the legislature. 

MACROECONOMIC ENVIRONMENT

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.

Macedonia is working to build a country-wide natural gas pipeline and distribution network. Currently, Macedonia receives its small natural gas supplies from Russia via Bulgaria. In 2016, Macedonia signed a memorandum of understanding with Greece to build an interconnector that could connect to the Trans Adriatic Pipeline that will traverse the region once complete, or to an LNG import terminal in Greece.

Macedonia maintained macroeconomic stability through the global financial crisis by conducting prudent monetary policy, which keeps the domestic currency pegged to the euro, and inflation at a low level. However, the internal political crisis has hampered economic performance, with GDP growth slowing in 2016 and 2017, and both domestic private and public investments declining.

In 2019, the public debt was 59,5% of GDP and the State debt 50,7%.

LABOR MARKET

Unemployment eased in 2016 and early 2017, helped by public investment and employment programs, but labor force participation fell to its lowest since 2012. Public investment in infrastructure should sustain employment creation. Poverty is expected to continue to decline, propelled by job creation.

Employment grew 2.5% year-on-year (y-o-y) in 2016 and 2.7% in the first half of 2017. A large share of the newly created jobs are linked to employment programs in trade, transport services, and manufacturing. Labor force participation stood at around 57% in 2016 and early 2017, the lowest rate since 2012. In 2019, the unemployment rate was 17,76%.

Macedonia’s economy is closely linked to Europe as a customer for exports and source of investment, and has suffered as a result of prolonged weakness in the eurozone.

The reform agenda, outlined in the Government Program 2017–20, focuses on economic growth, job creation, fair taxation, support to small and medium enterprises, and reform of social protections for the most vulnerable.  

BANKING SYSTEM

The financial system in Macedonia consists of the National Bank of the Republic of North Macedonia (NBRNM), commercial banks, financial companies, savings houses, exchange offices, the Deposit Insurance Fund, insurance companies, pension funds, investment funds, brokerage firms, and a stock exchange.  The banking system itself is two-tiered, based on the Banking Law and the National Bank Law. NBRNM is the independent money-issuing institution responsible for price stability, stability of the national currency (denar), stability of the financial system, liquidity of payments within the country and abroad, and the conduct of monetary policy and foreign exchange policy.  The Supervision Department at NBRNM serves as the main regulatory body responsible for the supervision of all banking institutions and savings houses.

The banking system in North Macedonia consists of 13 private banks, one state-owned bank (Macedonian Bank for Development Promotion), and two savings houses. According to the Banking Law, banks observe the principles of profit maximization, liquidity, safety, and profitability.  A foreign bank can have a presence either as a legal entity or by opening a branch or a representative office.  In 2018, foreign capital was present in 13 and was dominant in 11 banks, controlling 71.6 percent of total banking sector assets, 80 percent of total loans, and 71.8 percent of total deposits. The operations of non-bank financial institutions are regulated by the provisions of the previous Banking Law and appropriate sub-laws. North Macedonia’s Total Deposits was reported at 7.787 USD bn in July 2020.

In 2018 NBRNM conducted regular stress-tests on banking sector sensitivity to different risks.  All tests showed that the banking sector is healthy and resilient to such shocks, with its capital adequacy ratio remaining well above the legally required minimum of eight percent in all scenarios.  Banking supervision is in full compliance with BASEL 2 recommendations, and it is currently implementing provisions of BASEL 3 standards.

Although considerably improved over the past several years, North Macedonia’s financial system is still relatively underdeveloped compared to Western standards. Banking is very conservative, offering traditional banking services only. Credit is available to private companies, but is still subject to significant collateral in the form of real estate, which often is appraised by the banks at lower than market value. Overall customer service does not meet Western standards. However, the use of credit cards is widespread and most companies and shops accept credit cards as a payment instrument.

HEALTHCARE

Once a healthcare leader in the region, the Republic of Macedonia is now struggling to maintain its healthcare system at an average level and its once good reputation. A lot of changes have been introduced in order to reverse the effects of the loss of high quality staff and the decay of medical facilities, but such improvements are currently not or little visible.

Almost all citizens (about 95% of the total population) of North Macedonia are insured by the obligatory HIS, in various modalities, on the basis of their employment, on the basis of their retirement rights and on other grounds, unemployed persons registered by the Employment Office, beneficiaries of basic social care, war-disabled persons (soldiers and civilians), family members of the insured who serves in the Army, persons who are in prison or sentenced to other punitive measures, as well as persons in religious communities. 

There have been some remedies proposed in the governmental draft programme for the period between 2017-2020. In order to keep the quality staff in the country, higher salaries (doubled by the end of the mandate) and better specialisation conditions are planned. Certain fees that are currently covered by the patients themselves, according to the programme, will be eliminated, and there will also be a reduction in administrative staff to ensure better quality and efficiency. The Government also plans to introduce changes that will decrease check-up and appointment waiting time, as well as increase quality in that respect. The introduction of certain medical facilities like a diabetes centre, and children’s hospital has also been planned for, as well as construction of a new and well-equipped university clinical centre to pave the path to quality medical research and healthcare.

SOCIAL WELFARE

The main institutions where citizens of Macedonia (F YROM) can initiate the procedure to protect and/or exercise their social rights are the Centers for Social Work, which can be found in most major municipalities. They decide on the rights related to social security, detects and determines social issues and problems, provides social assistance for vulnerable cases (including VOTs), etc.

The main structure of the national pension system in North Macedonia consists of: a statutory pension scheme (first pillar); a statutory funded pension scheme (second pillar); and a supplementary pension scheme (third pillar). The statutory pension scheme is mandatory for all economically active people. The statutory funded pension scheme is mandatory for those who started to work from 1 January 2013 onwards.

The assistance to vulnerable persons and groups falls within the scope of the Ministry of Labor and Social Policy. Together with the Centers for Social Work and other public institutions, they implement numerous programs dedicated to the especially vulnerable groups.

SOURCES
https://www.export.gov/apex/article2?id=North-Macedonia-Banking-Systems
https://www.fomoso.org/en/mosopedia/background-knowledge/challenges-in-the-healthcare-system-of-the-republic-of-macedonia/
http://www.worldbank.org/en/country/northmacedonia/overview
https://www.cia.gov/LIBRARY/publications/the-world-factbook/geos/mk.html
https://files.returningfromgermany.de/files/CFS%202018%20North%20Macedonia%20ENG.pd
http://country.eiu.com/macedonia
https://www.nordeatrade.com/en/explore-new-market/north-macedonia/trade-profile