Foreign investors return to Macedonia despite ongoing political crisis

Foreign investors return to Macedonia despite ongoing political crisis
By bne IntelliNews August 31, 2016

Foreign direct investment (FDI) in Macedonia went up by 12.1% to €122.9mn in the first half of the year from €109.6mn a year earlier, preliminary central bank data indicated on August 31. The figure is equal to 1.3% of the forecast 2016 GDP.

FDI increased after declining in the first quarter of the year, and plunging 23.5% y/y to €157mn in 2015, a fall attributed to the political turmoil in the country. However, it seems that foreign companies are still interested in investing in Macedonia despite the continuing political uncertainty in the country, encouraged by generous incentives from the government. 

One of the government's priorities is to attract more foreign investors by offering favourable conditions in the country’s free industrial zones, of which the biggest is the Bunardzik zone near Skopje. Around 1,400 new jobs are expected to be created in the free zones across the country by the end of 2016.

Despite this, in June, net FDI was negative, at -€2.9mn, compared to positive €17.9mn a year ago, central bank data indicated.

On August 19, Fitch Ratings downgraded Macedonia's ratings to 'BB' from 'BB+', due to the unresolved political crisis and its consequences for the economy. Fitch noted that the political crisis had started to adversely affect the economy as real GDP growth slowed sharply to 2% y/y in Q1 from 3.7% in 2015, dragged down by a large contraction in investment.

However, there are now signs that the crisis is coming to an end, as all four of the country's main political parties agreed on August 31 to set December 11 as the date for early elections

The latest major foreign investor to enter the country is Agricorp Invest, part of Monaco Resources. The leader of Macedonia's governing VMRO-DPMNE Nikola Gruevski wrote on his Facebook page on August 30 that the company had entered Macedonian market through the acquisition of a majority stake in Bonum, processor of mushrooms and other vegetables.

Monaco Resource Group is active in various fields, agriculture, metals and mining, energy and the financial sector. Monaco Resources will launch a brownfield investment that will create 100 jobs. The acquisition was made through Agricorp Invest subsidiary Agri Food Invest Luxembourg, the company said on its website.

Other foreign companies to announce plans to invest in Macedonia this year include US car parts maker Johnson ControlsGermany's STS Textiles and Swiss Wood Flooring Solutions.