13th December 2020, Skopje – In the medium term, average economic growth rate is projected to reach 5%, unemployment is projected to reduce to 12.4%, while employment rate is projected to surge to 52.1%. Net wage in the coming 5 years is expected to increase up to average rate of 4%. Following the overcoming of COVID-19 crisis, export is expected to experience double-digit growth starting next year. These projections are noted in the Fiscal Strategy which, for the first time, includes projection for 5 instead of 3 years all to the end of longer term planning.
The Fiscal Strategy states that, starting next year, economic growth in the country is expected to shift to the positive zone, amid recovery in investments, consumption and external demand, whereby 4.1% growth is projected in 2021 according to the baseline scenario, which is based on weakening of the health crisis and gradual improvement of the epidemiologic picture, improved utilization of the production and the hospitality industry capacities, favourable effects from the economic measures, as well as increased confidence at both the consumers and the investors.
Redesigning of the budget policy and the policies aimed at economic recovery and intensified growth (SmartER Growth) are solid basis for accelerating the economic growth in the coming period, restoring the pre-crisis economic growth in the second half of 2022 and providing for faster economic growth pace thereafter. Hence, according to the baseline medium-term scenario, average annual growth in the period 2022 – 2025 is projected at 5.3%, i.e. economic growth in 2025 is expected to reach 5.9%.
According to the Fiscal Strategy, export activity is expected to grow by 14% in 2021 as a result of exhausting the unfavourable economic effects from the pandemic and improved utilization of the production capacities of the domestic companies, as well as due to the low comparative basis. Projected growth of external demand is expected to contribute thereto in conditions of positive outlook for the economic activity in the EU and the other country’s trade partners. In the medium term, in conditions of expected stabilization of the growth of external demand and increased export potential in the country via inflow of FDIs, the export is expected to have a solid contribution to the economic growth, i.e. it is projected to experience average annual growth of 9.1% in real terms in the period 2022-2025.
Gross investments are projected to experience real growth of 7.7% in 2021, with average annual growth of 8.5% in the period 2022-2025, whereby investments planned in the public sector, increased support for private sector development and strengthening the competitiveness, resorting the confidence of the business entities and more intensive inflow of FDIs, also encouraged by the country’s NATO membership, are envisaged to have significant effects on the investments.
Both private and public consumption are expected to grow starting next year, with the private consumption experiencing real growth of 3.5% in 2021 and average annual growth of 4% in the period 2022-2025. Public consumption growth is projected at 4.3% in 2021, with average growth of 1.5% in the period 2022-2025, as a result of the efforts to reduce the non-essential expenditures and their rationalization, as well as implementation of the fiscal consolidation process.
According to the projections, average number of employed persons is expected to increase by 2.2% in the period 2021 – 2025. Increase of demand in this period is expected to also reflect on the labour supply, projected to increase by 1.2% annually in average. Such trends on the labour market will contribute for the average unemployment rate in 2025 to drop to 12.4% and average employment rate to surge to 52.1%.
Key elements of the medium-term fiscal policy in the Strategy 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. Redesigning the budget policy is closely related to the Strategy for Economic Recovery and Intensified Growth, comprising four pillars: economic recovery from COVID-19, intensified, inclusive and sustainable economic growth, boosted competitiveness of the private sector and development of human resources and equal opportunities.
Budget expenditure structure is envisaged to be gradually changed, aimed at increasing the share of capital investments.