North Macedonia’s ambition to attract higher-quality foreign investment is increasingly tied to progress on European Union accession, raising fears that prolonged uncertainty is undermining the country’s long-term economic transition.

While the country continues to offer investors access to European supply chains, relatively low labour costs and a network of industrial incentives, both the European Commission and analysts interviewed by IntelliNews argue that deeper integration with the EU Single Market is essential if North Macedonia is to move beyond its traditional role as a low-cost manufacturing hub.

The issue has come into sharper focus after foreign direct investment (FDI) fell sharply in 2025. According to central bank data, net FDI dropped to €467.5mn last year, down from €1.2bn in 2024, a decline that has reignited debate over the country’s investment competitiveness at a time of weaker European growth and rising regional competition.

Although inflows recovered in the first quarter of 2026, reaching €218.6mn, up 46.7% year-on-year, the improvement has been driven largely by reinvested earnings from existing companies rather than a surge of new entrants, suggesting that confidence among current investors remains more resilient than appetite among newcomers.

A European Commission spokesperson told IntelliNews in emailed comments on June 9 that North Macedonia’s investment attractiveness remains closely linked to its European perspective.

“North Macedonia’s access to the EU Single Market, proximity to suppliers and customers, low taxes and incentives, and competitive labour costs make it an attractive destination for foreign investment,” the spokesperson said.

However, the Commission’s spokesperson stressed that the outlook depends heavily on continued enlargement momentum, regulatory alignment and structural reforms, including infrastructure upgrades, labour market participation and skills development.

The Commission also argued that North Macedonia must gradually shift away from competing primarily on cost and instead focus on higher-value sectors such as advanced manufacturing, automation and ICT, supported by stronger innovation capacity, digital transformation and reforms of industrial zones.

“The positive outlook on economic development of course depends on the continued enlargement process and perspective, the further alignment of legislation and regulation, the full integration into the EU market, the sustained modernisation of infrastructures, upgrading of skills, as well as increasing labour market participation, especially for women,” the spokesperson said.

“The EU stands ready to support this work,” she added.

According to Brussels, reforms should also prioritise labour productivity, research and development, and a redesign of investment incentives to attract more sophisticated industries.

The spokesperson also said the EU Growth Plan, particularly Pillar One on gradual Single Market integration, is “essential to promote investment attractiveness,” alongside stronger macroeconomic resilience, energy diversification into renewables and prudent fiscal policy.

“Addressing these challenges will help North Macedonia transition from a low-cost manufacturing hub to a competitive, innovation-driven economy integrated into global value chains,” she said.

However, that structural reform alone may not be enough without a clearer political trajectory towards EU membership.

“The slowed EU integration process undoubtedly affects North Macedonia’s capacity to attract a larger volume of foreign direct investment,” Dimitar Nikolovski, chief executive of EuroThink, told IntelliNews in a written comment.

“For investors, the European perspective is an important indicator of political stability, legal predictability and long-term economic security. Prolonged uncertainty about the accession process creates a perception of risk, which may deter investors or direct them towards other countries in the region with a clearer European trajectory.”

He added that the impact goes beyond investor sentiment and directly affects the country’s development capacity: “In addition, progress in negotiations with the EU brings access to larger European funds, financial mechanisms and programs to support infrastructure, innovation and private sector development. The absence of such progress also means limited opportunities for economic transformation and modernisation, which indirectly affects the country’s competitiveness as an investment destination.

In conditions of strong regional competition, the slowdown in European integration sends a message of uncertainty that has real economic consequences on the investment climate.”

The challenge is compounded by the ongoing dispute with Bulgaria, which continues to block progress in North Macedonia’s EU accession talks. Under the 2022 framework, Skopje is required to amend its constitution to include Bulgarians as a recognised community before negotiations can advance to the next stage.

During a visit to Skopje on June 2, European Council President António Costa reiterated that constitutional amendments remain a prerequisite for further progress.

Meanwhile, Bulgaria's new Prime Minister Rumen Radev argued that Skopje simply needs to fulfil its existing commitments. North Macedonia’s Prime Minister Hristijan Mickoski has taken a more cautious position, insisting that the country needs guarantees against future Bulgarian vetoes or additional demands before proceeding.

Despite political friction, the EU is pushing for renewed momentum in enlargement, including proposals for gradual integration into parts of the Single Market before full membership, discussed at the EU-Western Balkans summit in Tivat on June 5.

For now, North Macedonia retains several structural advantages, including competitive labour costs, established industrial zones and integration into European production networks. International institutions such as Fitch Ratings remain cautiously optimistic, expecting gradual improvements supported by external demand, exports and remittances.

However, concerns over rule of law, judicial independence and corruption persist, with members of the European Parliament’s Foreign Affairs Committee noting on June 3 that reform progress remains insufficient in key areas.

The rebound in early 2026 suggests that investor confidence has not been lost, but analysts agree that a sustained recovery in foreign investment will depend on whether North Macedonia can simultaneously deliver deeper institutional reforms and present a more credible, stable and predictable path towards European Union membership.