14th June 2023, Skopje – Further fiscal consolidation, gradual reduction of budget deficit and public debt, as well as boosting the economic activity through higher capital expenditures and scaled-up infrastructure investments, improving the conditions for doing business and job creation are the results expected under the medium-term projections included in the 2024 – 2028 Fiscal Strategy of the Republic of North Macedonia, prepared by the Ministry of Finance, which the Government adopted at its last session.
Fiscal Strategy comprises medium-term guidelines and goals of the fiscal policy, main macroeconomic projections, amounts of the main categories of projected revenues and expenditures, as well as budget deficit and debt projections. It is designed in line with the new Organic Budget Law, which sets fiscal rules, designed and harmonized with the EU fiscal rules, all to the end of sustainable fiscal policy in the medium term.
“Fiscal Strategy is a key document setting the medium-term guidelines which the fiscal policy will be led by in the coming period. Key elements of the medium-term fiscal policy are redesigning of the budget policy and the fiscal consolidation, aimed at supporting the macroeconomic stability, accelerating the economic growth, thus strengthening the growth potential of the national economy”, Minister of Finance, Fatmir Besimi, pointed out.
In the coming medium-term (five-year) period, we remain committed to expenditures supporting achievement of strategic priorities, acceleration of economic growth, as well as the EU integration processes of the Republic of North Macedonia and fulfilling the obligations arising from the NATO membership.
According to the Fiscal Strategy, amid exhaustion of the unfavorable effects of the overlapping crises, it is expected for the global trends to get back to normal, inflationary pressures to reduce and economic activity at our major trading partners to strengthen, thus contributing to increased external demand and more favourable investment climate.
We remain committed to fiscal consolidation and gradual reduction of the budget deficit from 4.6% in 2023, to 3.4% in 2024, 3.0% in 2025 and 2026, 2.8% in 2027, reaching 2.5% in 2028. Fiscal consolidation will continue by supporting the economy with investments in infrastructure projects, redesigning the public finance structure by increased share of capital expenditures, as well as strengthening the process of planning, executing and reporting as regards the public finance. Fiscal policy remains to focus on ensuring substantial public investments, which are a precondition for improved economic prospects, as well as better living conditions for the citizens. Medium-term projections include a strong development component, with a significant share of capital expenditures of more than 5% of GDP annually, and are key elements of public finances. Golden rule of public finance is adhered to in the medium term – capital expenditures higher than the budget deficit, i.e. borrowing will be made only for the purpose of financing investment projects. The Budget will be executed by adhering to the value for money principle, while care will be taken to ensure that the citizens’ money will be geared towards generating greater benefits in attaining the goals for higher standard of living. The amounts projected for the coming period speak of speeding up the infrastructure projects, i.e. investments in road and railway infrastructure, energy and utilities infrastructure, as well as capital investments aimed at improving the conditions in the health, education and social systems, agriculture, culture, sports, environment protection and judiciary. Execution of capital expenditures and implementation of infrastructure projects in the priority areas, in line with the government policies, are expected to generate positive multiplier effects on medium-term economic growth and accelerate the real economic convergence towards the economy of the European Union.
Ensuring sustainable economic growth and development envisaged in the Fiscal Strategy is also key priority of the tax policy, which is aimed at increasing the efficiency and the effectiveness of revenue collection, enhancing the tax transparency, improving the quality of services and reducing the administrative burden.
Under the Strategy, maintenance of macroeconomic stability and fiscal sustainability are expected to create favourable conditions for intensifying the economic activity and attaining average growth rate of 5% in the period 2024 – 2028. Private consumption is expected to reach an average annual growth of 3.5%, public consumption will increase 1% in average, export is expected to maintain the solid level with a projected growth of 8.5%, with positive developments at foreign investments and 6% increase of the average wage also expected to continue.
Ministry of Finance prepares the Fiscal Strategy and submits it to the Government of the Republic of North Macedonia, taking into account the strategic priorities of the Government and the proposal of the parent budget users. Starting this year, on its website, Ministry of Finance has announced, for the first time, a plan with set time framework for the preparation of the Fiscal Strategy. Medium-Term Fiscal Strategy is in line with the medium-term fiscal goals and the strategic priorities of the Government and it provides for monitoring the dynamics of revenue performance and expenditure execution in relation to the fiscal goals. One of the key priorities of the Government is enhanced public finance management and strengthened medium-term budgeting for the next 5 years, which is also part of the process of the country’s accession to the EU.
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