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Macedonia Economy
 
 
 

General

Recently ranked as the fourth 'best reformatory state' out of 178 countries ranked by the World Bank, Macedonia has undergone considerable economic reform since independence. The country has developed an open economy with trade accounting for more than 90% of GDP in recent years. Since 1996, Macedonia has witnessed steady, though slow, economic growth with GDP growing by 3.1% in 2005. This figure was projected to rise to an average of 5.2% in the 2006-2010 period. The government has proven successful in its efforts to combat inflation, with an inflation rate of only 3% in 2006 and 2% in 2007 and has implemented policies focused on attracting foreign investment and promoting the development of Small and Medium-sized Enterprises (SMEs). The current government introduced a flat tax system with the intention of making the country more attractive to foreign investment. The flat tax rate was 12% in 2007 and was further lowered to 10% in 2008.

Despite these reforms, as of 2005 Macedonia's unemployment rate was 37.2% and as of 2006 its poverty rate was 22%. Corruption and a relatively ineffective legal system also act as significant restraints on successful economic development. Macedonia still has one of the lowest per capita GDPs in Europe. Furthermore, the country's grey market is estimated at close to 20% of GDP.

In terms of structure, as of 2005 the service sector constituted by far the largest part of GDP at 57.1%, up from 54.2% in 2000. The industrial sector represents 29.3% of GDP, down from 33.7% in 2000 while agriculture represents only 12.9%, up from 12%. Textiles represent the most significant sector for trade, accounting for more than half of total exports. Other important exports include iron, steel, wine and vegetables.

Tourism is an important part of the economy of Macedonia. The country's large abundance of natural and cultural attractions make it an attractive destination of visitors. It receives about 700,000 tourists annually.

Overview

Economy - overview
Macedonia's small, open economy make it vulnerable to economic developments in Europe and dependent on regional integration and progress toward EU membership for continued economic growth. At independence in September 1991, 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 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 down-sized Yugoslavia, and a Greek economic embargo over a dispute about the country's constitutional name and flag hindered economic growth until 1996. GDP subsequently rose each year through 2000. In 2001, during a civil conflict, the economy shrank 4.5% because of decreased trade, intermittent border closures, increased deficit spending on security needs, and investor uncertainty. Growth averaged 4% per year during 2003-06 and 5% per year during 2007-08. 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 nearly 35%, but may be overstated based on the existence of an extensive gray market, estimated to be more than 20% of GDP, that is not captured by official statistics. In the wake of the global economic downturn, Macedonia has experienced decreased foreign direct investment, lowered credit, and a slowdown of export growth. The Government of Macedonia now predicts growth in 2009 to be no more than 3%.

GDP (purchasing power parity)
$18.52 billion (2008 est.)
$17.71 billion (2007)
$16.85 billion (2006)
note: Macedonia has a large informal sector


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