Country Risk Rating

A very uncertain political and economic outlook and a business environment with many troublesome weaknesses can have a significant impact on corporate payment behavior. Corporate default probability is high. - Source: Coface

Business Climate Rating

The business environment is acceptable. Corporate financial information is sometimes neither readily available nor sufficiently reliable. Debt collection is not always efficient and the institutional framework has shortcomings. Intercompany transactions may thus run into appreciable difficulties in the acceptable but occasionally unstable environments rated A4.


  • Association and Stabilization Agreement with the EU, candidate for accession since 2003
  • Integrated into the European manufacturing chain
  • Close to factories in central Europe and at the meeting point of two European corridors
  • Wage competitiveness
  • Support from European donors
  • High levels of remittances from expatriate workers (13.7% of GDP)
  • Denar pegged to the euro


  • Low employment rate (48%), high structural unemployment and lack of productivity due to inadequate training
  • Large informal economy due to inefficient government and cumbersome regulation
  • Sustained emigration to the EU of young people, who face a 37.2% unemployment rate
  • High level of euroisation (36.7% of bank deposits and 41.4% of credit)
  • Inadequate transport, energy, health and education infrastructure
  • Polarised political landscape
  • Tensions between Slavic majority and Albanian minority
  • Lengthy EU accession negotiations in prospect, due to insufficient progress in efforts to fight corruption and organized crime and strengthen the rule of law

Current Trends

Growth still highly vulnerable to the pandemic

The economy began to recover in the second half of 2021 and is expected to continue in 2022. Domestic demand (89% of GDP in 2019) should contribute the most to GDP growth. Vaccination campaigns in 2021 rekindled optimism among households, whose consumption is expected to grow in 2022, albeit slower. Unemployment is falling slowly but steadily (16.4% in 2020, 15.8% in 2021), and fiscal responses have prevented it from increasing, although weak labor market participation (56%) remains a major structural problem. Private investment (34.5% of GDP with FDI in 2019) plummeted in 2020 due to the crisis and is expected to return to pre-COVID-19 levels after 2022. The economy remains highly vulnerable to new variants, as the vaccination rate was only 35% in October 2021. The tourism sector (6.8% of employment and 6.6% of GDP in 2019) is suffering, and its return to an average activity level will be slow. Public spending (36.7% of GDP in 2020) is expected to remain high, exceeding pre-crisis levels, due to the continued fiscal response to the pandemic and infrastructure projects (continuation of the Corridor 8 rail and road project, gas pipeline with Greece). The trade deficit will make a negative contribution to growth in 2022.


The central bank (NBRNM) continues to pursue an accommodative monetary policy, with a rate of 1.25% in September 2021, supporting access to liquidity and credit. Inflation accelerated in 2021 due to higher energy, food, and transportation costs. It is expected to decline in 2022.


Twin deficits deteriorate

Continued support measures in response to the pandemic contributed significantly to the government deficit in 2021. In 2022, the debt will be reduced as these measures are gradually phased out. Fiscal consolidation should further cut the deficit in the medium term. However, these efforts must be improved by tax evasion linked to the informal economy (estimated at 30% and 40% of income and 18% of employment) and shortcomings in tax administration and the labor inspectorate. Budget deficits in recent years have increased public debt, which is expected to rise in 2022. Most of the public debt is external (75%) and denominated in euros, but the credibility of the NBRNM, which guarantees the peg to the euro, lessens the exchange rate risk. The NBRNM has additionally signed financing agreements with the ECB and could access EUR 400 million if necessary. Private external debt is also substantial, representing 40.5% of GDP, although some correspond to FDI-related intra-group loans.


Regarding the external accounts, the current account deficit narrowed in 2021 as official remittances from expatriates increased due to travel restrictions and the recovery in host countries, which offset the traditional trade deficit (17% in 2021) to a more significant degree. This trend is expected to continue in 2022, with the upturn in tourism and continued brisk growth in road transport counteracting the trade deficit, which reflects the country’s productive structure, in which capital and consumer goods must be imported. The debt should be primarily financed by FDI (about 3% of GDP), which is recovering. Foreign exchange reserves have increased marginally and, in June 2021, representing the equivalent of more than one-quarter of GDP, or four months of import coverage.


EU membership is a long way off


Early parliamentary elections in July 2020 saw a narrow victory for the coalition of the Social Democratic Alliance of Macedonia (SDSM) and the Albanian party BESA. In the October 2021 local elections, the nationalist opposition party VMRO-DPMNE, the second-largest party in the country, won more mayorships than the SDSM. This could weaken the ruling coalition, which holds only 62 out of 120 seats in parliament, before the next elections in 2024. Prime Minister Zoran Zaev resigned following the defeat.


The government indicates the country’s willingness to join the European Union. In addition to becoming the 30th member state of NATO in March 2020, North Macedonia reached a political agreement to begin accession negotiations. In November 2020, Bulgaria blocked the start of talks because of cultural and historical disputes between the two countries.


Pending the start of negotiations, Serbia, Albania, and North Macedonia have created an Open Balkan zone, which builds on the Mini-Schengen initiative backed by the European Union and the United States. The location, which will be implemented by 2023, provides greater freedom of movement for goods and people, including in the labor market and lifting border controls.


Coface (02/2022)
North Macedonia