N. Macedonia needs medium-term fiscal strategy, scaling-up clean energy - EBRD

While policy responses to protect the living standards of citizens in an environment of surging inflation are warranted, care should be taken to avoid untargeted measures or ones that are difficult to reverse, the EBRD recommended in its Transition Report 2022-2023 on Tuesday.

North Macedonia needs a credible medium-term fiscal strategy in accordance with the organic budget law to help govern decision-making, the bank noted.

The country also needs to scale up the use of clean energy to boost the competitiveness of exports in the context of high energy import prices and strong trade links with the European Union, the EBRD said, adding that the country has already strengthened its commitment to green transition.

"In adopting its final National Energy and Climate Plan (NECP), the country set a date of 2027 for the closure of its two coal power plants. The ambitious plan features carbon taxation, energy efficiency measures and gas as a transition fuel."

Following the pandemic, North Macedonia made a good recovery, resulting in a rise in domestic trade and improved manufacturing. However, in 2022, inflation is escalating and unpredictability has grown, the EBRD added.

The lender envisages North Macedonia's economic growth to slow down to 2.3% in 2023 from 2.7% projected for 2022, mainly due to the economic impact of the war in Ukraine.

Inflation is expected to average around 10.6% this year, compared with 3.2% in 2021, the EBRD said.