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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT APRIL 2007
MACEDONIAN STOCK EXCHANGE
ECONOMIC AND POLITICAL DEVELOPMENTS
Economic and Political Environment
The Republic of Macedonia is a country
placed in the middle of the Balkan Peninsula,
with a population of just over two million. In
1991, it declared its sovereignty from
Yugoslavia, and has since experienced mixed
success in liberalizing its economy.
The industrial sector comprises about 18%
of GDP and employs about one-third of those
holding jobs in the formal economy.
The largest components of industrial
production are metals, chemicals and food
and beverage processing. The privatization
process is almost finished and the country has
adopted a market economy system.
The President of the Republic of Macedonia is
Mr. Branko Crvenkovski. The Prime Minister of
the Government is Mr. Nikola Gruevski.
Economic Performance
After the elections held in July, a new
government was formed. The program of the
new government anticipates reforms in several
areas, such as: introduction of flat rate taxes,
fight against the corruption, more favorable
climate for foreign investments etc. All reforms
in the following years will be tailored towards
the main goal of Macedonia: accession into
the EU and NATO. Macedonia is an EU
candidate country and is expected to be
accepted as a NATO member in 2008.
Macedonia officially joined CEFTA in February
2006 and new trading arrangements took
effect from July. A “one-stop shop” for the
registration of businesses came into effect in
January 2006, reducing the time taken to
establish a business from 48 days to 5 days.
In March 2006 parliament approved new
bankruptcy legislation, aiming to shorten
proceedings and reduce costs. The new
pension law took effect in September 2005
and contributors started to be transferred to
private pension funds in January 2006.
Real GDP grew by 4% in 2005. The economy
was driven by exports, especially metal and
textile products, while private consumption
and investment increased by 0.8% and 1.5%
respectively. Unemployment remained high at
36.5% at the end of 2005. Following deflation
in 2004 and subdued consumer prices in
2005, inflation increased in the first half of
2006 reaching 4% in August. The rise was
mainly due to tax increases and high energy
prices. The exchange rate against the euro
remained stable at around 61 denar, in line
with the Central Bank’s exchange rate policy.
The current account deficit declined from 7.8%
of GDP in 2004 to 1.3% in 2005, driven by a
substantial increase in net current transfers as
well as a decline in the trade deficit. The
amount of FDI was expected to increase
substantially in 2006 as a result of energy
sector privatization. In December 2005 the
government issued a Eurobond in value of
EUR 150 million, listed on the London Stock
Exchange, which was used to retire debt owed
to London Club creditors.
On 1 September 2005 the IMF approved a
new three-year stand-by arrangement with
Macedonia, which, together with a new World
Bank loan, will set the economic policy
framework for the whole of the forecast period.
The IMF and World Bank agreements require
the authorities to push through structural
reforms of the labor market and the judiciary,
and to improve the functioning of the public
administration.
From the beginning of 2004 the Government
has started issuing t-bills, and from November
2005 it started to issue government bonds.
The plans for the next years are the issues of
bonds to become more significant than
dominant.
In August 2005 Macedonia was given credit
ratings by S&P of “BB” for domestic debt and
“BBB+” for external debt. In November 2005
FitchRatings gave Macedonia long term credit
rating in domestic and foreign currency “BB”
with positive prospects, short term credit rating
“B” and maximal country rating “BB.”
Key Information Contacts
Central Securities Depository www.cdhv.org.mk
Securities & Exchange Commission www.sec.gov.mk
National Bank of the Republic of Macedonia www.nbrm.gov.mk
Ministry of Finance www.fin.gov.mk
2002 2003 2004 2005
GDP (US$ millions) 3.769 4.631 5.368 5.625
GDP per capita (US$) 1.885 2.316 2.653 2.850
Real GDP growth (%) 0.9 2.8 4.1 4.0
Industrial production growth (%) -0.8 6.6 -2.1 7.0
Inflation rate (%) 1.8 1.2 -0.4 0,5
External debt (US$ millions) 1.635 1.813 2.044 2.258
Foreign currency reserves (US$ billions) 0.73 0.90 0.99 1.33
Foreign direct investments (US$ millions) 77.7 94.3 150.1 120.0
Export (US$ millions) 1.112 1.359 1.672 2.041
Import (US$ millions) 1.916 2.211 2.785 3.097
Information provided by Macedonian Stock Exchange
2004-ORIGINS OF GROSS DOMESTIC PRODUCT (%)
Services Industry
Agriculture, forestry, fishing & water management
2004-COMPONENTS OF GROSS DOMESTIC PRODUCT (%)
Private consumption Public consumption Gross fixed investment
Changes in stocks Exports of goods & services Imports of goods & services
58.9
27.8
80
70
60
77.9
60.5
50
40
40.2
13.2
30
20
20.8
17.8
10
0
3.7
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