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IMF says Macedonia may achieve 2.5% GDP growth in 2013

IMF says Macedonia may achieve 2.5% GDP growth in 2013

SKOPJE (Macedonia), November 9 (SeeNews) – The International Monetary Fund (IMF) said that Macedonia may achieve economic growth of 2.5% in 2013, mostly driven by public investment and better performance of net exports.

Macroeconomic prospects are improving, and Macedonia is well-positioned to return to growth on the back of a gradual recovery in Europe, the IMF said in a statement on Friday, after an IMF team conducted post-programme monitoring of the Macedonian economy during October 29–November 8.

However, considering the still uncertain external environment, a broadening of the growth base towards domestic private demand and signs of a stronger pickup in private credit would help balance the risks to the outlook, the fund noted.

In the second quarter of 2013, Macedonia's economy expanded by a real 3.9% on the year, according to an estimate by the country's statistics office. In 2012 it contracted by 0.2%.

The IMF also recommended that government policies should start shifting away from providing stimulus to the economy and focus on preserving fiscal and external sustainability.

Expanding and diversifying Macedonia’s export base is necessary to accelerate income convergence towards Western European economies, and would also help bolster external sustainability, it added.

Over the medium term, Macedonia needs to achieve stronger flows of foreign direct investment  (FDI) and to strengthen the linkages between FDI and the domestic productive sector in order to ensure faster and more balanced growth.

In 2012, net FDI in Macedonia plunged to a revised 72 million euro ($96.7 million) from 336.8 million euro a year earlier. In the first eight months of 2013, it jumped to a preliminary 157.3 million euro from a revised 61.5 million euro a year earlier.

The IMF also said that the Macedonian authorities’ fiscal targets through 2016, if met, would secure a decline in the ratio of central government debt to GDP starting in 2017, to some 36% in 2018. However, if demand shows signs of recovering faster than expected, the authorities should consider a more frontloaded consolidation.

($=0.7445 euro)