ECONOMIC OUTLOOK - Austria's Raiffeisen Bank Projects Macedonia's 2008 C/A Gap at 1.9%/GDP

November 28 (SeeNews) - Austrian banking group Raiffeisen on Wednesday forecast Macedonia's 2008 current account gap at 1.9% of the planned gross domestic product (GDP), compared to a projected 1.5% for 2007, it added that would-be investors were at present hesitant because of the unrest in neighbouring Kosovo.

Macedonia's August current account balance showed a preliminary surplus of 72.53 million euro ($107.03 million), as compared to a surplus of 30.19 million euro a year earlier.

"Although the leading indicators point to an increase in future economic growth, investors are hesitant, due to the current risks represented by the Kosovo conflict. Therefore, we believe settlement of the Kosovo issue will boost the attractiveness of the country for foreign investors," Raiffeisen said in its November report on Macedonia.

"However, FDI (foreign direct investment) in 2007 will not reach half of the level of 2006, the C/A balance is likely to reach negative triple-digit USD million figures and the combination of low growth rates and low income levels still characterises the country's economy,” Raiffeisen added.

FDI in Macedonia fell by $5.4 million year-on-year in August and totalled $99.53 million for the first eight months of 2007.

Raiffeisen forecast the country's 2008 budget surplus at 1.0% of GDP the same as this year’s projection.

Macedonia ended September with a 10.401 billion denars consolidated budget surplus, up from 9.870 billion denars a month earlier.

Macedonia is pursuing a tight fiscal policy, keeping moderate public and external debt levels and debt service ratios, under its arrangements with the International Monetary Fund and in view of its country's status as an official EU candidate country since December 2005, though without a date for starting negotiations yet.

The southern Serbian province of Kosovo has been under U.N. rule since 1999, when NATO bombing forced ex-Yugoslav strongman Slobodan Milosevic to halt a crackdown on separatist ethnic Albanians which Western powers said was leading to the repression of civilians.

The ethnic Albanian majority insists on independence while Serbia says it will not give more than broad autonomy. A new round of talks on the status of Kosovo started in September with a December 10 deadline.

Forecasts from Raiffeisen's research paper follow:

(1 euro= 61.0239 Macedonian denars)