North Macedonia Outlook | Growth improved in late 2024
CEE Macro Outlook , 26. Mai
Economy expanded 2.8% y/y in 2024, despite a slow start to the year. Growth was domestically driven, notably from the public side, as highway works accelerated towards year-end. On the external side, both exports and imports contracted, albeit exports to a larger degree, thus delivering a net negative contribution to headline figure.
Growth is expected to remain driven mostly by domestic factors, while external environment still poses significant risks. Real wage gains and fiscal support from higher public wages and pensions should support private consumption, once sentiment improves. Headwinds from a weak European growth outlook due to trade and political uncertainty will weigh on exports and private investment, weakening the pickup in output growth.
Inflation is under control, notwithstanding strong wage pressure, although caution is still warranted given the renewed surge in food prices in the last few months. Fiscal gap is still too wide, given the current level of growth, and has pushed public debt above the 60% of GDP mark. Fiscal risks are elevated due to looming 2026-2028 eurobond maturities.
There has been no progress regarding the stalemate in EU accession negotiations, as the bilateral issue with Bulgaria is still preventing the country to move forward in that respect.
Growth is expected to remain driven mostly by domestic factors, while external environment still poses significant risks. Real wage gains and fiscal support from higher public wages and pensions should support private consumption, once sentiment improves. Headwinds from a weak European growth outlook due to trade and political uncertainty will weigh on exports and private investment, weakening the pickup in output growth.
Inflation is under control, notwithstanding strong wage pressure, although caution is still warranted given the renewed surge in food prices in the last few months. Fiscal gap is still too wide, given the current level of growth, and has pushed public debt above the 60% of GDP mark. Fiscal risks are elevated due to looming 2026-2028 eurobond maturities.
There has been no progress regarding the stalemate in EU accession negotiations, as the bilateral issue with Bulgaria is still preventing the country to move forward in that respect.