Excerpts from Key findings of the 2021 Report on North Macedonia:

On the economic criteria, North Macedonia has made some progress and is at a good level of preparation in developing a functioning market economy. Severely hit by the pandemic, the economy slipped into a recession in 2020. A gradual recovery set in as of spring 2021. The government implemented a strong fiscal response to mitigate the crisis impact on households and firms. The fiscal deficit rose to 8.2 % of GDP in 2020 while the public debt level rose sharply to 60.2 % of GDP, as additional financing needs had to be covered. Capital expenditure was cut in a budget revision to create space for crisis-related transfer payments, yet it was still heavily under-executed. The authorities took some additional measures to improve fiscal transparency, although a fully operational state aid registry is yet to be developed. There has been little progress made in improving revenue mobilisation and collection, as well as public investment management, including through a stronger framework for public-private partnerships. The new organic budget law, which is expected to significantly improve fiscal governance, is yet to be adopted by Parliament, and its implementation is delayed. Bolstered by regulatory easing, the financial sector remained strong and lending to the private sector constant. The business environment continued to be impeded by the large size of the informal economy.

North Macedonia has made some progress in addressing last year's recommendations and is moderately prepared to cope with competitive pressure and market forces within the Union. Integration with the EU in trade and investment remained entrenched also during the pandemic. The level and structure of trade and manufacturing output were affected by lockdowns and supply chain disruptions, domestically and in trade partner countries. The structure of the industry is continuously improving. The deterioration in labour productivity and price competitiveness in 2020 reflects to a large degree the economic impact of the pandemic and the government's job-retention measures. Vocational Educational Training (VET) curricula has improved. Still, skills shortages, reflecting shortcomings in education curricula, capital investment gaps, and limited integration of domestic firms in global supply chains are restricting potential growth. Digitisation of the economy is progressing.

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Source: ec.europa.eu/commission/