SKOPJE, September 26, 2022 – North Macedonia’s economy needs a greater emphasis on trade diversification and openness if it is to create quality jobs, reduce poverty and improve people’s living standards, says a new World Bank report, The Trade Policy Strategy 2.0 for North Macedonia.
Over the past two decades, North Macedonia has made strong strides in reforming its economy and attracting foreign direct investment, which have helped it reach the status of a middle-income country.
Today, however, amid a dynamic 21st century labor market, the structure of the economy remains largely unchanged and trade policy has stagnated. North Macedonia struggles with persistently high levels of unemployment, and around 18 percent of the population remain in poverty.
The report finds that a lack of trade diversification and a concentration of exports limit the role of trade in North Macedonia’s economy, with growth rates continuously below those of EU and other Western Balkan countries.
“Trade could be a strong engine of growth for North Macedonia, by transforming the economy, creating viable jobs, and reducing poverty,” said Massimiliano Paolucci, World Bank Country Manager for North Macedonia. “But, for this to happen, the country needs a more open and diversified trade policy, including a greater focus on trade in services, to reap the economic benefits.”
Trade openness in services has been weaker than for merchandise, highlighting the untapped potential for trade in services, which will be key in transforming the economy towards that of a high-income country.
A new trade strategy would allow North Macedonia to expand its economic diversification through agriculture, agri-business, services, and more complex manufacturing, which will ultimately lead to greater better paid job creation, business growth and survival, and poverty reduction.
The report argues that trade policy reforms need to be introduced as part of a broader strategy to improve the business climate, attract investment, and raise productivity in the economy. North Macedonia’s ability to achieve greater economic diversification will depend on a wide range of factors, including competition policy, investment policies, innovation, and education policies.