Macedonia

Leaders

President Gjorge Ivanov
President of the Government Zoran Zaev

Background

Macedonia gained its independence peacefully from Yugoslavia in 1991. Greek objection to Macedonia’s name, insisting it implies territorial pretensions to the northern Greek province of the same name, and democratic backsliding have stalled the country’s movement toward Euro-Atlantic integration. Immediately after Macedonia declared independence, Greece sought to block Macedonian efforts to gain UN membership if the name “Macedonia” was used. Macedonia was eventually admitted to the UN in 1993 as “The Former Yugoslav Republic of Macedonia,” and at the same time it agreed to UN-sponsored negotiations on the name dispute. In 1995, Greece lifted a 20-month trade embargo and the two countries agreed to normalize relations, but the issue of the name remained unresolved and negotiations for a solution are ongoing. Since 2004, the US and over 130 other nations have recognized Macedonia by its constitutional name, Republic of Macedonia. Ethnic Albanian grievances over perceived political and economic inequities escalated into an insurgency in 2001 that eventually led to the internationally brokered Ohrid Framework Agreement (OFA), which ended the fighting and established guidelines for constitutional amendments and the creation of new laws that enhanced the rights of minorities. Relations between Macedonians and ethnic Albanians remain fragile, however.Macedonia has been engulfed in a political crisis that began after the 2014 legislative and presidential election, and which escalated in 2015 when the opposition party began releasing wiretap content that it alleged showed widespread government corruption. Although Macedonia became an EU candidate in 2005, the country still faces challenges, including overcoming the political crisis, fully implementing the OFA, resolving the outstanding name dispute with Greece, improving relations with Bulgaria, halting democratic backsliding, and stimulating economic growth and development. At the 2008 NATO Summit in Bucharest, Romania, the Allies agreed that Macedonia would be invited to join the Alliance as soon as a mutually acceptable resolution to the name dispute was reached with Greece.

Economy

Since its independence in 1991, Macedonia has made progress in liberalizing its economy and improving its business environment. Its low tax rates and free economic zones have helped to attract foreign investment, which is still low relative to the rest of Europe. Corruption and weak rule of law remain significant problems. Some businesses complain of opaque regulations and unequal enforcement of the law.Macedonia’s economy is closely linked to Europe as a customer for exports and source of investment, and has suffered as a result of prolonged weakness in the euro zone. Unemployment has remained consistently high at about 23%, but may be overstated based on the existence of an extensive gray market, estimated to be between 20% and 45% of GDP, which is not captured by official statistics.Macedonia is working to build a country-wide natural gas pipeline and distribution network. Currently, Macedonia receives its small natural gas supplies from Russia via Bulgaria. In 2016, Macedonia signed a memorandum of understanding with Greece to build an interconnector that could connect to the Trans-Adriatic Pipeline that will traverse the region once complete, or to an LNG import terminal in Greece.Macedonia maintained macroeconomic stability through the global financial crisis by conducting prudent monetary policy, which keeps the domestic currency pegged to the euro, and inflation at a low level. However, in the last two years, the internal political crisis has hampered economic performance, with GDP slowing in 2016, and both domestic private and public investments declining. Fiscal policies were lax, with unproductive public expenditures, including subsidies and pension increases, and rising guarantees for the debt of state owned enterprises, and fiscal targets were consistently missed. In 2016, public debt reached 50.5% of GDP before being revised down to 47.8% of GDP by year’s end, still relatively low compared to its Western Balkan neighbors and the rest of Europe. In 2016, Macedonia issued a Eurobond worth approximately $495 million to finance 2016 and part of 2017 budget needs.

GDP

10.9 Billion