May 11 (SeeNews) - The European Bank for Reconstruction and Development (EBRD) said on Wednesday it revised downward its forecast for Macedonia's gross domestic product (GDP) growth to 3.2% in 2016 and 3.5% in 2017 to reflect risks arising from political turmoil in the country.
In the previous report, released in November, the EBRD said it expects that Macedonia's economy would expand by 3.5% in 2016.
"Downside risks have increased as a result of a political crisis, while the sharp increase in public debt in recent years is another source of risk," EBRD said in its latest Regional Economic Prospects report.
In 2015 Macedonia's economy expanded by 3.7% on the back of household spending, public investment and strong export performance, the bank added.
Several days ago Macedonia's central bank warned that the political situation could curb the economic growth to 1.6%. This would happen mainly due to the lower private consumption and lending, as well as less investments, the bank said in its alternative economic scenario prepared over the past month. Under the central bank's baseline scenario, the country's economy would expand by 3.5% this year and by 4% in 2017.
Macedonia has been locked in a political crisis since January 2015 when opposition SDSM leader Zoran Zaev accused the coalition government of the conservative VMRO-DPMNE and the ethnic Albanians' DUI of corruption, wiretapping illegally thousands of people and covering-up a murder. For its part, the government charged Zaev with trying to destabilise the country.
In a bid to break the political deadlock, in June the main political parties, with the mediation of the European Union, reached a deal to hold early elections on April 24. On February 22, the polls were postponed for June 5 under pressure from the EU and the US, which insisted that Macedonia needed more time to meet the international community's requirements for organising credible elections. The SDSM, however, said it will boycott the elections because it believes the key EU requirements for fair and credible votes have not been met yet.
On Wednesday the two ethnic Albanian parties - the Democratic Union of Integration and the Democratic Party of Albanians - too said they will not take part in the elections. DUI is part of the ruling coalition together with VMRO DPMNE.