Publication: FYR Macedonia Public Expenditure Review
Date
2008-02
ISSN
Published
2008-02
Author(s)
World Bank
Abstract
Progress in advancing political and
economic reforms has been substantial this decade. The
authorities have moved with determination in implementing
the Framework Agreement for Peace (the Ohrid Agreement) that
ended the 2001 hostilities, including enhancing the
representation of minorities in governmental structures.
This, together with economic reforms and the implementation
of the Stabilization and Association Agreement (SAA) with
the European Union (EU), led the European Council to grant
FYR Macedonia the status of a candidate country in December
2005. In 2003, the Government introduced a stabilization
program focused on tighter fiscal policy and supported by
the continuation of the de facto pegging of the exchange
rate against the euro. The budget deficit was virtually
eliminated in the first year of the program and in the
subsequent years spending has been sharply reduced as a
share of Gross Domestic Product (GDP). The fiscal adjustment
helped improve financial stability and placed public debt
ratios on a steadily declining path, with government debt
amounting to about 30 percent of GDP at the end of 2006. The
balance of payments has improved since 2003, and especially
since 2005. In fact, FYR Macedonia has the smallest current
account deficit in the region equivalent to 0.4 percent of
GDP. A key challenge for the new Government is to adopt
policies that will facilitate formalization of economic
activity, including employment. In this context, the
authorities are urged to explore options to reduce social
security contribution rates, starting with the elimination
of the minimum contribution threshold which represents an
enormous disincentive for formal sector employment for
low-wage and part-time workers.
Citation
“World Bank. 2008. FYR Macedonia Public Expenditure Review. © Washington, DC. http://openknowledge.worldbank.org/entities/publication/830d0944-ab6a-5981-965a-42df54df55fe License: CC BY 3.0 IGO.”