North Macedonia’s central bank cuts GDP growth projection for 2024

North Macedonia’s central bank cuts GDP growth projection for 2024
Forecast lowered to 2.6% after underperformance in 2023 and less favourable external environment this year.
By Valentina Dimitrievska in Skopje May 13, 2024

North Macedonia's central bank said on May 13 it has revised its growth projections for the country's economy to 2.6% for 2024 and 3.6% for 2025 down from October forecast for growth of 3% and 4%, respectively.

These adjustments are attributed to several factors, including the underperformance witnessed in 2023 and a less favourable external environment.

Moreover, the delayed impact of domestic factors, notably the sluggish progress in executing construction activities linked to new infrastructure projects, has contributed to the revised projections. Nevertheless, a modest uptick in growth is anticipated for 2026, underpinned by an improved external environment, greater stability, and increased consumer and investment activity.

In tandem with the growth outlook, inflationary pressures are expected to follow a downward trajectory throughout the projection period. Projections for 2024 indicate a deceleration in price growth, with an average inflation rate of 3.5%, aligning with the lower bound of the range anticipated in October (3.5% to 4%). Over the medium term, inflation is forecasted to converge towards the historical average of 2% by 2025-2026.

Assessing the external position of the economy, recent developments have been deemed favourable, surpassing earlier expectations, which is particularly evident in the surplus in the current account in 2023, primarily driven by a significant reduction in imports. Looking ahead, an anticipated upswing in export demand, alongside stabilised energy and primary product prices, is expected to mitigate the current account deficit, projected to reach 2.1% of GDP by 2025-2026.

Furthermore, with the envisaged acceleration in economic growth and a more stable outlook, the central bank anticipates a corresponding uptick in credit market activity. Average credit growth for the period 2025-2026 is forecasted at 6.8%, bolstered by an increase in total deposits, anticipated to rise by 7.4% by the end of 2024 and further accelerate to 7.6% over the subsequent two years.