MACEDONIA

mprovements in Macedonia’s regulatory framework have cre- I ated a stable environment for foreign and domestic investment, but political instability has undercut vibrant growth. Although WORLD RANK: REGIONAL RANK: Macedonia depends primarily on economic activity in service sectors, new investment in automotive parts manufacturing is 31 18 helping to diversify the economy. Businesses benefit from com-

ECONOMIC FREEDOM STATUS: petitive flat tax rates and an open trade regime. MOSTLY FREE Greater structural reform is still needed, especially in the area of government corruption and bureaucracy. The legal framework is sound, but enforcement is slow and weak. Frequently changing business regulations and selective law enforcement hinder the confidence of foreign investors.

ECONOMIC FREEDOM SCORE

70.7( ▲ UP 3.2 POINTS ) 

      60.9 68.0 WORLD AVERAGE REGIONAL AVERAGE (EUROPE REGION)

NOTABLE SUCCESSES: CONCERNS: OVERALL SCORE CHANGE Tax Policy, Trade Freedom, and Rule of Law, Investment Freedom, SINCE 2013: Business Freedom and Financial Freedom +2.5

FREEDOM TREND QUICK FACTS



POPULATION: UNEMPLOYMENT:  2.1 million 26.9% GDP (PPP): INFLATION (CPI): $29.0 billion –0.2%  3.7% growth in 2015

5-year compound FDI INFLOW: $174.2 million annual growth 2.4%  $14,009 per capita PUBLIC DEBT: 38.6% of GDP 

          2015 data unless otherwise noted. Data compiled as of September 2016

BACKGROUND: Macedonia gained its independence from the former Yugoslavia in 1991. Nikola Gruevski of the conservative Internal Macedonian Revolutionary Organization–Democratic Party for Macedonian National Unity resigned as prime minister in January 2016, embroiled in a wiretap scandal. Emil Dimitriev is serving as interim prime minister. The VMRO-DPMNE had prevailed in the April 2014 presidential and parliamentary elections in a coalition with the Albanian Democratic Union for Integration. The Social Democratic Union of Macedonia, the main opposition party, disputed the results and boycotted parliament. Macedonia completed NATO’s Membership Action Plan in 2008, but Greece continues to block its accession because it objects to Macedonia’s name. This dispute is also delaying Macedonia’s accession to the European Union.

258 2017 Index of Economic Freedom KEY: WORLD AVERAGE 12 ECONOMIC FREEDOMS | MACEDONIA

RULE OF LAW GOVERNMENT SIZE

44th 41st 43rd 19th 94th 103rd Rank

 

 

 

 

  

67.0 61.4 52.0 91.9 68.9 72.6   Property Judicial Government Tax Government Fiscal Rights E ectiveness Integrity Burden Spending Health

Although the legal basis for protecting the The individual income and corporate tax rates are ownership of movable, intellectual, and real property a flat 10 percent. Other taxes include a value-added exists, implementation remains incomplete. The legal tax and a property transfer tax. The overall tax burden framework is sound, but law enforcement is weak, and equals 24.6 percent of total domestic income. Govern- the public doubts the government’s willingness to ment spending has amounted to 32.2 percent of total prosecute corrupt officials. Political interference, ineffi- output (GDP) over the past three years, and budget MACEDONIA ciency, cronyism, and corruption are pervasive. deficits have averaged 3.9 percent of GDP. Public debt is equivalent to 38.6 percent of GDP.

REGULATORY EFFICIENCY OPEN MARKETS

23rd 62nd 64th 50th 89th 39th Rank

 

 

 

 

 

81.5 66.7 80.8 86.1 60.0 60.0   Business Labor Monetary Trade Investment Financial Freedom Freedom Freedom Freedom Freedom Freedom

Streamlined processes for business formation and Trade is extremely important to Macedonia’s operation provide an environment that is fairly condu- economy; the value of exports and imports taken cive to private investment and production. After years together equals 113 percent of GDP. The average of high unemployment, recent reforms have focused applied tariff rate is 2.0 percent. In general, foreign and on making the labor market more flexible. Almost half domestic investments are treated equally. State-owned of government spending is allocated to social transfers enterprises distort the economy. The financial sector designed in part to shore up support for the ruling has become more dynamic. Bank competition has parties. Subsidized hospitals are being built to attract increased, and the foreign presence accounts for more “medical tourists.” than 80 percent of total banking-sector assets.

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