Pre-accession economic programme Macedonia 2009-2011

Abstract

After the two exceptional years of strong growth and over performance of planned budget revenues, towards the end of 2008 (q4), the economy started to feel the effects of the global turmoil. Though the Macedonian financial sector was not directly hit by the global financial crisis, the real economy and production started to decline. The first industry that suffered from worsening global environment was the metal industry where both world prices of metals declined and world demand contained. While by the end of 2007 and the first half of 2008 the main challenge for the economic policy was accelerated inflation, in the second half of 2008 the inflation rate began to decrease and the primaryevocation became the global economic turmoil. Hence, the authorities reduced the initially projected real GDP growth of 6.7% in 2009 to 5.5% and respective revision to the planned budget revenues was made. However, we are all facing the uncertainty about the severance and duration of the crises meaning that additional revisions of the growth and planned revenues might happen. The indirect impact of world crises on Macedonian economy can come from different channels. Lower world growth could worsen the current account deficit which widened in 2008 to about 12% of GDP, through lower export demand (60% of total exports are directed in the EU), falling world metal prices (metals constitute 40% of exports), or weaker private transfers (including remittances).