The International Monetary Fund (IMF) on Tuesday said North Macedonia’s economy is projected to grow 3.3% in 2025, supported by strong domestic demand and rising public investment, but warned that persistent inflation and rising debt levels pose significant risks.
The IMF, concluding its 2025 Article IV consultation, urged authorities to tighten fiscal policy, limit wage and pension increases, and accelerate structural reforms to maintain economic stability and meet fiscal rule thresholds.
“Growth is gaining momentum, but downside risks remain elevated,” the Fund said, citing weak external demand, high real wage growth, and stalled productivity reforms.
Headline inflation has eased in recent months as energy and food prices declined, but core inflation remains stubbornly high, driven by strong wage increases. The IMF recommended that the central bank maintain its current policy rate and tighten liquidity conditions until inflation shows a sustained decline.
Fiscal deficit and public debt breach legal limits
North Macedonia’s fiscal deficit widened to 4.4% of GDP in 2024 amid increased election-year spending, including an ad hoc 20% pension hike. Public debt rose to 63% of GDP, exceeding the country’s legal ceiling of 60%. The IMF called for a five-year corrective plan in line with fiscal rules.
The Fund advised the government to suspend additional pension increases planned for September and return to a rule-based pension indexation from 2026. Public wage growth should be capped at the inflation rate, and tax reforms should aim to improve compliance and reduce exemptions.
Monetary policy and financial stability
The IMF praised the National Bank of the Republic of North Macedonia (NBRNM) for effectively managing the recent energy price shock and beginning to cautiously ease monetary policy. However, it warned that premature loosening could reignite inflation.
It also expressed concern over recent legal amendments that shift a greater share of NBRNM profits to the government and weaken the bank’s reserve mechanism, potentially undermining its independence and credibility.
Call for structural and governance reforms
The IMF urged authorities to advance reforms to raise productivity and support EU accession efforts. Priorities include improving public investment management, reducing informality, addressing labor shortages, and raising women’s labor participation.
It also called for governance reforms to strengthen rule of law and anti-corruption institutions, limit the use of fast-track laws in parliament, and ensure greater transparency in regulatory processes.
The Fund said a new national anti-corruption strategy offers a chance to accelerate reform momentum.
