Macedonia Finance Profile 2012

The foundations of a competitive market economy are by and large present in Macedonia. The freedoms of pricing, of participating in the market and, particularly, of setting up a business are guaranteed, and the present administration has vigorously worked on reducing entry and exit barriers to doing business. In spite of legislative reforms and the lowering of social contributions and personal income tax rates, the volume of the informal sector is still high. Reforms of the judiciary are aimed at filling the gap between the regulations and their implementation. The administration has also undertaken a “regulatory guillotine” program that aims to streamline official bureaucracy, especially as it applies to opening a new business. Public institutions suffer from a number of deficiencies, including widespread corruption and deficits in the rule of law. Macedonia is a WTO member, and its very liberal trade environment has helped it become a member of CEFTA. Macedonia has been an EU candidate country since 2005.

There is a state-mandated anti-monopoly commission particularly designed to tackle this issue. On the other hand, in practice, confident sectors have been left under the power of the monopolies for a long time. The laws are applied only periodically, and bureaucratic corruption still takes its toll. Preventing monopolies and cartels with an anti-monopoly commission that is subordinate to the Ministry of Finance appears to be ambiguous in an environment that is still marked by major public enterprises and public ownership.

Foreign trade has been widely deregulated, and there is no fundamental state intervention in free trade. This particularly applies to the treatment of foreign investments and stockholding. There are no restrictions or controls on payments, transactions, transfers or the repatriation of profits.

Macedonia has a concrete capital market characterized by substantial foreign ownership of banks, low shares of nonperforming loans and hard budget constraints between companies, banks and the public sector. A main problem for Macedonia’s economic development remains the high cost of credit for SMEs. The government has tried to ease access to capital for SMEs, which make up 99% of the economy, by setting up a State Guarantee Fund.