Macedonia Economy

Macedonia Economy


  • Basic data
  • Public finances and the state budget
  • Banking system
  • Tax system

Basic data

According to, the Macedonian economy is one of the weakest in Europe and is also one of the weakest in the former Yugoslavia. However, in the last decade (with the exception of the pandemic), it has been relatively successful. Between 2004-2008, it grew by 5% per year, mainly thanks to domestic consumption and exports (mainly textiles and metals). Then came the economic crisis, but in recent years it has grown at around 3% per year. Liberalization of the energy sector in 2019 significantly helped growth.

Unemployment in the country is at a high level and two factors are responsible for it. Primarily, it is a significant gray economy that flourishes in the country, and secondarily also the Muslim tradition of non-working women within the Albanian minority. Inflation has been stable for a long time, the standard of living is rising slightly, the trade balance has been negative for a long time.

Probably the biggest challenge for the Macedonian economy was and is the COVID-19 pandemic. The most pessimistic scenarios predict a GDP decline of -4.5% in 2020. The forecast for 2021, on the other hand, is optimistic +3.9%, with the expectation of a global economic recovery after the pandemic. The pandemic has a logical impact on unemployment growth as well, rising to 20.4% in 2020 followed by an expected slight decline to 19% in 2021. In an effort to mitigate the impact on the economy, the government implemented anti-crisis measures that significantly helped the economy. The total economic aid from all measures taken by the government is estimated at EUR 550 million, or about 5.5% of North Macedonia’s GDP. The National Bank of North Macedonia cut the interest rate by 0.25% to 1.75%. It has also revised its credit risk regulation to support banks, to temporarily restructure loans and relax credit classification standards. In addition, it reduced the reserve base by the amount of new loans to businesses in the affected sectors.

Pointer 2018 2019 2020 2021 2022
GDP growth (%) 2.7 3.2 -4.5 3.9 3.6
GDP/population (USD/PPP) 15,736.0 16,520.0 15,990.0 16,940.0 17,960.0
Inflation (%) 1.5 1.3 1.1
Unemployment (%) 17.3 16.7 20.4 19.0
Export of goods (billion USD) 5.8 6.0 5.2 6.1 6.8
Import of goods (billion USD) 7,8 8.2 7.3 8.5 9.3
Trade Balance (Billion USD) -2.1 -2.2 -2.1 -2.3 -2.6
Industrial production (% change) 5.4 3.7 -9.3 8.7 4.1
Population (millions) 2.08 2.08 2.08 2.08
Competitiveness 55/140 54/141 54/141 ON ON
OECD export risk 5/7 5/7 5/7 5/7 ON

Source: EIU, OECD, WEF

Public finance and state budget

Public finance
State budget balance (% of GDP) -8.4
Public debt (% of GDP) 59.5
Current account balance (billion EUR) -234.7
F.O 10%
VAT 18% – 5%

North Macedonia can be described as a small tax haven of the Balkans with exaggeration. There are 15 designated zones in which companies can get relief from paying corporate income tax and personal income tax, as well as a subsidy for construction costs of up to EUR 500,000. By default, both base rates are 10%. The normal VAT rate is 18% and the reduced (e.g. for food) 5%. Both the state budget balance and the current account balance have been negative for a long time, and the public debt is growing slightly every year.

This fiscal year, the government will continue to borrow, capital investment is again a high priority, and a moderate reduction in the public debt is planned for the medium term. Most of the money will go to social policy and healthcare. Entrepreneurs have long emphasized that the state should focus on eliminating the gray economy. The state plans to spend over four billion euros this year, with revenues of €3.45 billion, leaving the coffers short by more than €500 million. The deficit of the state treasury will be compensated by the issuance of new bonds, the sale of state land (primarily agricultural), the sale of shares in companies in which the state has shares and the privatization of state companies that are in bankruptcy.

According to state officials, the deficit in the budget should be significantly smaller than this year. Most of the borrowed money is still directed as financial aid for the economy and the preservation of jobs in the affected sectors. The budget shortfall last year was about EUR 920 million (8.4% of GDP). At the end of June last year, the public debt exceeded a total of EUR billion (60% of GDP, which is the maximum pot for admission to the EU). In the following years, stabilization of the public debt is planned. Debt is projected to fall to 58.8% of GDP by 2025. Covid-19 is still affecting the economy, but to a lesser extent than in 2020, and the economy is slowly recovering.

This year’s budget is balanced with a focus on healthcare, the economy, capital investment, system functionality and support for judicial reform and European integration. For 2021, capital investments are estimated at €373 million.

Banking system

North Macedonia inherited a state-owned banking system from the former Yugoslavia with a structure that suited the planned economy of the time. The monetary independence of Macedonia was implemented in accordance with the adoption of legal acts in the field of monetary policy on April 26, 1992. This act laid the foundations of the banking system of today’s North Macedonia. However, the restructuring of the Macedonian banking system began relatively late, only in 1995, with the write-off of old savings in foreign currency, receivables and liabilities in connection with foreign loans and the rehabilitation of the largest Macedonian bank – Stopanska Banka. The banking system of the Republic of North Macedonia is built on a standard model. There is one state central bank and a number of commercial banks.

Commercial banks carry out their activities independently and under the supervision of the state banking supervision. Until recently, the Macedonian banking system consisted of 17 banks and eight savings banks. Compared to previous years, the number of banks has decreased due to their consolidation, i.e. the merging of smaller banks to withstand the pressure exerted by large banks. In 2018, the banking sector consisted of 16 banks and seven savings banks. In 2019, the number of banks decreased to 15, and only three savings banks remained active.

The banking system of North Macedonia consists of the following banks: Komercijalna banka ad Skopje, Stopanska banka ad Skopje, NLB Tutunska banka ad Skopje, Makedonska banka za poddrška i razvoj ad Skopje, Oxridska banka-sparkasse adSkopje, Sparkasse Bank ad Skopje, Stopanska banka ad Bitola, TTK banka ad Skopje, Halk banka ad Skopje, Silk Road banka ad Skopje, Capital banka ad Skopje, Universal investment banka ad Skopje, ProCredit Bank ad Skopje and Centralna cooperative banka ad Skopje.

Savings Banks: FULM Štedilnica doo Skopje, Mak – BS Štedilnica doo Skopje, Štedilnica Oposcije doo – Skopje.

Most banks and savings banks are owned by foreign capital and operate in a standard way, so you can use their services and deposit money with them without any worries. Especially when it comes to Stopanská, KB, NLB, or Halk banka.

There is also a Macedonian Development Bank in the country, which aims to support and stimulate the development of the Macedonian economy in accordance with the strategic policies, goals and priorities of the state. It is a joint stock company in which the Republic of North Macedonia is the sole shareholder.

Tax system

Corporate income tax is 10%, for IT companies it is 3%.

Personal income tax – taxable income consists of the following types of income received domestically and abroad: personal income; income from self-employment; income from property and property rights; income from copyrights and industrial property rights; capital income; capital gains; winnings from games of chance; and other income. The tax base for determining personal income tax is the sum of all income received from money, securities, in kind or any other kind domestically and abroad during the tax period, less: mandatory social security contributions; personal exemption in the amount of MKD 98,736 in the calculation of annual income tax and standard or actual costs established by law. Tax on all types of income, with the exception of income from gambling, has a uniform rate of 10%. Gaming revenue is subject to a 15% rate.

Value Added Tax – VAT is paid at every level of sale of goods and services and export of goods. The tax base is the price of sold products and services, which does not include VAT. Standard VAT is 18% and is charged in most cases. The reduced VAT rate is 5% and applies to basic food, newspapers, communal services, etc.

The following are completely exempt from value added tax: sale and lease of buildings and apartments (except for the first sale, made within 5 years from the time of construction); Postal Services; banking, financial and insurance services; cultural services provided by public institutions; health and education care; software; international passenger transport; goods export.

Property Tax – Property sales tax rates are prorated and range from 2% to 4%.

Macedonia Economy