30th January 2024, Skopje – Consistent Government policies on fiscal sustainability and economic growth prospects affirmed yet again. Despite the adverse external factors, Republic of North Macedonia has kept BB- rating with stable outlook, awarded by S&P Global Ratings. S&P expect accelerated economic growth, moderate public debt and fiscal consolidation, with the progress in the EU accession process foreseen to have a positive effect.
As noted in the latest S&P Report, GDP growth is expected to accelerate to 2.9% in 2024 (2% in 2023), driven by increased household consumption, supported by real wage growth, ongoing infrastructure projects, including the Corridor 8 and 10d highway projects, and an increase in exports. Country’s growth potential cushions the unfavourable effects stemming from the developments at the key trading partners, in particular Germany. Public debt will remain moderate, stabilizing at about 53% of GDP over 2024 – 2027. Activities have been undertaken for sound management of interest payments, which are lower than that of many peers at a similar rating level.
Fiscal consolidation efforts are also among those noted by S&P. Under the adopted 2024 Budget, budget deficit is planned to be reduced to 3.4% of GDP from 4.6% in 2023. They also foresee for the fiscal consolidation to continue as the Government focuses on economic growth, primarily through infrastructure projects. Adhering strictly to the Organic Budget Law rules is crucial for further fiscal consolidation.
As indicated in S&P Report, EU accession remains a crucial catalyst for long-term structural and institutional development, supporting economic growth and addressing emigration challenges. Implementing the structural reforms is of key importance, with the risk factors being the external effects, the election process and the conditions on the financial markets. As regards inflation, they noted the sharp slowdown of inflation in December 2023, expecting its stabilization.
Importance of the IMF completing the First Review under the PLL Arrangement is also emphasized, as well as the access to funds under PLL and other sources of financing.
Since the beginning of the year, apart from the affirmed credit rating by S&P, country’s policies have been also affirmed by both the IMF and the World Bank with the newly signed Country Partnership Framework.
Credit rating of a country gives insight into the level of risk associated with investing in a particular country and it is one of the key indicators the potential investors consider when making decisions.