FYR Macedonia expects GDP growth despite political uncertainty

Amidst political instability and with no Government in sight yet, the FYR Macedonian National Bank has stated it expects the country’s economic stabilization in 2017. The National Bank sold a 25 billion denar worth of 28-day bills at a rate of 3.25%, lower than the January rate of 3.50%, therefore effectively lowering the benchmark interest rate. The Bank has also stated that the impact of the political crisis on the economy has been decreasing, evident by the fact that bank deposits have been increasing eight months in a row. The first three quarters of 2016 showed signs of a slowing economic growth (2.7% compared to 3.1% in the previous year), mostly due to the lengthy political crisis, but the Bank sees things looking up soon.

Earlier this month, the National Bank reported that it expects the economy to expand by 3.5% this year and up to 3.7% in 2018. It also forecasted an inflation rate of 1.3% for the year while 2016 ended with a deflation of 0.2%. The European Commission has also projected a 3.2% growth for the FYR Macedonian economy in 2017 and expects the domestic demand to be the biggest contributor to the growth.

The EC has also forest a decrease in the high unemployment rate which it expects will drop to 23.2% in 2017 and 22.0% in 2018. For reference, the unemployment rate in the third quarter of 2016 was down to 23.4% from the 24% registered in the second quarter.

The commission has, however, warned about risk of moving bank deposits out of the country if the political crisis continues for an extended period as well as about the potential decrease in foreign investments as a result.

Elena Kostovska
Eurofast Global, Skopje Office
Tel: +389 2 2400 225
Email: elena.kostovska@eurofast.eu