The Macedonian economy is expected to rebound staring early next year after the worst economic downturn on record since the declaration of independence and to return to pre-pandemic levels. Growth in 2022 is expected at 3.7 according to World Bank’s projections.
The new World Bank report on the Western Balkans, presented Tuesday, shows that the country’s public debt rose to 60 percent of the GDP and is expected to rise but at a slower pace compared to last year, because the economy is on the way to recovery.
Getting back to the path of sustainability will be top priority of the country and the country’s medium-term outlook is positive, says the World Bank, warning that negative risks are still looming because the pandemic hasn’t been eliminated and might linger on if vaccination wasn’t accelerated.
The World Bank estimates that the government’s response was timely by taking measures to support the economy and the citizens, which had cushioned the blow by the crisis and it is urging the government to continue awarding stimulus support, particularly aimed at most affected sectors, because the state doesn’t have limitless resources at disposal. Also, it states, certain sectors have started to recover.
“One must be careful in order to avoid erosion of the fiscal space. There is some uncertainty, how long the pandemic will last, but on the other hand, a level of fairness in distribution of financing should be maintained. A balance should be established between the support awarded and vigilant monitoring of the recovery of certain activities as well as management of the short-term impact of the pandemic,” says Sanja Madzarevikj of the World Bank.
According to the World Bank, recovery is slower than expected, likely due to the second and third wave of the pandemic. The sectors of agriculture and information technology fared well, while construction is one of the first sectors that has recorded recovery in the second half of the year. The unemployment rate dropped due to an increase in the rate of activity instead of as a result of job creation.
The current price pressure, recorded in food products – also characteristic for the countries in Europe – isn’t expected to continue in the coming period.
The long-term policies the government should focus on include building strong institutions, rule of law, reforms in education, investments in human capital, digitization and green transition.
According to the World Bank report on the Western Balkans shows that nearly 139,000 jobs were lost in the region due to the pandemic. Some 165,000-360,000 people live in poverty. Montenegro has been hit the worst by the pandemic.