North Macedonia’s economy showed a strong bounce back in growth at the end of 2024, growing by 2.8% y-o-y. Real Gross Domestic Product did the same, a welcoming sign that the nation’s economic recovery is on a consistent path. The economy of the country was impacted with growing trade deficits and increasing inflation.
In 2023, North Macedonia recorded a current account surplus of 0.4% of GDP, marking a period of relative economic balance. That trend was reversed in 2024. The external current account finally changed direction moving into a -2.3% of GDP deficit. The trade gap deepened this trend, increasing by two percentage points to 20.1% of GDP. This development signals ongoing trade challenges that the country must address to achieve sustainable economic growth.
The National Bank of North Macedonia acted swiftly and decisively given this rapid change in the economy. They cut the key interest rate two additional times, lowering it to 5.35%. This act was designed to get people spending and investing again. This was particularly unexpected as inflationary pressures mounted to intolerable levels, around 5% y-o-y by late 2024 and early 2025.
As a sign that inflationary pressures are starting to subside, the annual inflation rate improved, relaxing to 2.7% y-o-y in March. They then went on to decline further, bottoming out at 2.6% in April. This decline can be interpreted as an indication that monetary policies have started to get in gear, preventing inflation and restoring price stability in the economy.
Domestic factors—especially public sector spending—drove growth during this development era. Infrastructure projects—particularly highway projects—gained momentum toward the end of the year. More activity meant more jobs were created and more economic growth was prompted. Continuing this emphatic commitment to public investment will be key for building on this momentum and achieving even greater success in years to come.
Analysts are optimistic about the long-term prospects for North Macedonia’s economy. They project it to continue growing 2.8% year-on-year in 2025, rising to 2.9% in 2026. Personal consumption growth should remain around 3% over the forecast horizon. While it’s encouraging to see these trends point in the right direction, there are major challenges still in front of us.
Foreign Direct Investment (FDI) hit an all-time high of 7.1% of GDP with record inflows such as Macedonia, evidence of the strong international confidence in the Macedonian market. This abundant new capital is necessary to help drive breakthrough innovation and strengthen key foundational sectors of our economy.
Although these developments are positive steps, North Macedonia is still faced with fiscal risks. The fiscal gap is still quite large given today’s level of growth, creating long-term economic stability risks. Yet, public debt has crossed the dangerous line of 60% of GDP. This dramatic increase poses serious questions about long-term fiscal sustainability and our capacity to fund the development of tomorrow.