N. Macedonia needs to further reduce informal economy – EBRD

“The focus should be on implementing measures to reduce the informal economy, in accordance with the government’s 2018-22 strategy and 2018-20 action plan, but also on balancing formal enforcement with measures targeting underlying incentives for informality, such as simplifying the rules for the establishment and operation of businesses,” the EBRD said in its Transition Report 2019-2020.

The labour market needs to become more competitive, the lender noted, adding that to ensure the sustainability of public finances, more ambitious fiscal consolidation measures have to be implemented.

According to the report, the government in Skopje should further improve revenue collection, reduce tax exemptions, rationalise subsidies and ensure long-term pension sustainability.

The EBRD noted that introduction of fiscal rules is also needed.

“North Macedonia is the only Western Balkans country lacking such rules.”

The country's economy has been recovering after the resolution of the political crisis, the EBRD said, noting that the growth accelerated to 2.7% in 2018 after just 0.2% in 2017, driven mainly by strong exports but also private consumption.

North Macedonia's economic growth is projected at 3.2% in 2019 and 2020 supported primarily by a rebound in investment, according to the report.

“The banking sector is liquid and well-capitalised but the share of non-performing loans (NPLs) is increasing,” the EBRD said, adding that in June the NPL ratio stood at 5.4%.