IMF Urges Macedonia to Continue Structural Reforms to Sustain Growth

An IMF mission, headed by Mark Griffiths, visited Macedonia from September 10 to 22, to conduct 2008 Article IV Consultation.

"The economy is growing strongly from five percent in 2007 and six percent in 2008, with industrial production growing at double digits. Strong investment and plentiful labor supply means there is considerable scope for this rapid growth to continue”, Griffiths said in a statement.

However, IMF advised Macedonia to lower the inflation to under 6% by the end of this year and around 3% next year.

“The rapid widening of the current account deficit poses a more serious concern, both in terms of keeping sufficient international reserves, and in maintaining external debt sustainability”, IMF statement said.

It added that the international financial turmoil heightens these concerns in terms that capital inflows weaken, or that slower world growth reduces exports or remittances in Macedonia.

“This year's supplementary budget includes a substantial increase in government spending, which will add to inflation and the current account deficit. While there is a need for public infrastructure investment, plans for a substantial increase in the central government budget deficit in 2009 may need to be reconsidered”, said the statement.

However, IMF praised the government that it has made considerable progress in improving the business climate, encouraging foreign direct investment, and cutting labor taxes to stimulate employment.

Macedonia joined the IMF in 1992. The country's three-year IMF stand-by arrangement for an amount equivalent to about $78.9 million (53.67 million euro) expired in August. Macedonia did not conclude other arrangement.

(1euro=$1.4701)