Macedonia's December 2016 election will pave the way for a normalisation of politics after years of deadlock, characterised by corruption allegations and major protests. However, political risk will remain elevated, as the scope for renewed stand-offs between the major parties and a stalled EU accession process could see social tensions periodically flare up.
Economic growth in Macedonia will slow on account of weaker euro area demand. However, a recovery in fixed investment and strong private consumption growth will lead to renewed growth acceleration from 2018 onwards.
Beyond the medium term, Macedonia's manufacturing sector will need to move up the value chain to ensure continued robust growth for the economy.
Major Forecast Changes
We have lowered our real GDP growth forecast from 3.6% to 3.2% for 2016 amid a disappointing Q116 GDP performance and recent downward revisions to German real GDP growth in light of Brexit.
A deeply divided legislature and elevated ethnic tensions threaten to delay further structural reforms over the coming years.
Germany's economic rebalancing process could see demand for Macedonia's manufactured goods exports decline over the coming years, leading to lower goods export growth and fixed investment.
|Real GDP growth, % y-o-y||3.5||3.7||3.2||2.9|
|Nominal GDP, USDbn||11.3||10.1||9.0||9.2|
|Consumer price inflation, % y-o-y, eop||-0.6||-0.3||0.8||1.9|
|Exchange rate MKD/USD, eop||50.70||56.50||58.60||59.10|
|Budget balance, % of GDP||-4.2||-3.5||-3.6||-3.3|
|Current account balance, % of GDP||-0.8||-1.4||-2.9||-2.9|
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