22nd December 2020, Skopje – Anti-crisis measures cushioned the decline of the economic activity which occurred as a result of COVID-19 induced crisis. If no swift actions were undertaken, economic downturn in the first three quarters would have been by 1.2 percentage points higher, i.e. it would have been around 7.1% in the first three quarters rather than 5.9%. In the coming period, focus will be put, above all, on economic recovery, as well as setting the bases for accelerated and sustainable growth, Minister of Finance, Fatmir Besimi, pointed out at the Conference “Socio-Economic Consequences of COVID-19 in North Macedonia – Lessons Learnt and Recommendations for Successful and Sustainable Recovery”, organized by UNDP and Finance Think.
The Minister underlined that the goal, in the long run, is for the country’s economic performance, through accelerated and sustainable growth, to measure up the EU average, i.e. development and economic standard to measure up the one of the developed economies.
Besimi stressed that it could be attained by implementing three platforms simultaneously, i.e. the Strategy for Economic Recovery and Accelerated growth, fiscal consolidation policies and Public Investments Plan.
The Strategy for Economic Recovery and Accelerated Growth is based on four pillars: economic recovery from the Coronavirus crisis, accelerated, sustainable and inclusive growth, increased competitiveness and networking with the global supply chains and human capital investments. The first pillar, economic recovery from the Coronavirus crisis, covers the following priorities: protection of the citizens’ health and social protection of the most vulnerable groups in the society, as well as support to the economy, the private sector and job protection. The second pillar, accelerated, sustainable and inclusive growth, focuses on good governance, such as the rule of law, eradicating corruption and capacity building of institutions, fiscal sustainability, macroeconomic and financial stability, local and equal regional development, sustainable and healthy environment, green economy and digitalization of the economy and the public services, under which various measures and activities are envisaged. The third pillar, increased competitiveness, focuses on strengthening the trade links and integration into the global value chains, improving the business environment and combating the shadow economy, improving the access to finance and technology adaptation, and modernization of agriculture. The fourth pillar, human resource development and equal opportunities, covers human resources development (education, science and health), intensified activity of the working age population and social protection and social security, under which various measures and activities are envisaged.
Accordingly, under the medium-term projections, growth will double in the coming five-year period, i.e. 4.6% growth in 2022, 5.2% in 2023, 5.6% in 2024 and 5.9% in 2025. Average economic growth rate is expected to stabilize to 5.75% annually in the period 2026-2030.
As regards the fiscal consolidation policies, the Minister pointed out, they will be implemented through improvement of budget revenue collection, reduction and restructuring of budget expenditures and changes in the sources of budget deficit financing. With respect to the revenue side, measure undertaken are, above all, aimed at reducing the shadow economy, strengthening the tax moral and a strategy to optimize fairness and functionality of the tax system. As regards the expenditure side, expenditures, in particular current ones, will be rationalized and reduced, while capital expenditures will be increased and their execution will be improved. From the point of view of budget deficit financing, focus will be put on optimizing the portfolio both from the point of view of costs and the sustainability for refinancing.
By implementing these policies, budget deficit will be gradually reduced below the Maastricht criterion, Minister of Finance underlined. Accordingly, the 2021 deficit is projected at 4.9%, being lower by 3.6 percentage points compared to this year’s projected budget deficit, reaching -3.8% in 2022, -3.2% in 2023, -2.9% in 2024, and -2% in 2025. Fiscal consolidation will be implemented gradually, all to the end of not quashing the growth in the post-crisis period.