- North Macedonia’s growth accelerated in recent years, but income convergence with the European Union has remained slow, while the renewed energy price shock poses new challenges for policymakers.
- The priority is to strengthen resilience to shocks, which requires coordinated monetary and fiscal policies to contain inflation and strengthen external and fiscal sustainability.
- Structural reforms are needed to boost productivity and offset the drag from emigration and population aging. Improving energy efficiency and accelerating the green transition are also critical to enhancing energy security, reducing vulnerabilities to energy price shocks, and supporting sustainable growth.
Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation for North Macedonia on May 29, 2026.[1] The authorities have consented to the publication of the Staff Report prepared for this consultation.[2]
Economic growth strengthened to 3.5 percent in 2025, driven by robust investment and private consumption amid tight labor market conditions. Inflation declined steadily through early 2026 but rose again in March, reflecting renewed pressures from higher global energy prices. Despite revenue shortfalls, fiscal targets were met in 2025, and public debt declined slightly, supported by strong nominal GDP growth.
Looking ahead, growth is projected to moderate to 3.1 percent in 2026 as the global energy shock weighs on activity, while inflation is expected to rise to 4.5 percent. Public debt is expected to remain broadly stable at around 60 percent of GDP, and the current account deficit to widen in the near term due to higher energy imports before narrowing over the medium term. Risks to the outlook are tilted to the downside and stem mainly from external shocks, including energy price volatility, weaker growth in key trading partners, and global financial tightening. Domestically, fiscal slippages—particularly related to wages, pensions, and large infrastructure projects—could undermine fiscal consolidation and confidence. At the same time, North Macedonia’s foreign exchange reserves remain adequate, and the banking sector is well capitalized and liquid.
Executive Board Assessment
Executive Directors agreed with the thrust of the staff appraisal. They welcomed North Macedonia’s strong growth and economic resilience despite a difficult external environment. Noting headwinds from the global energy shock, including from renewed inflationary pressures, and persistent productivity gaps and demographic pressures, Directors emphasized the need to rebuild policy buffers and advance reforms to safeguard macroeconomic stability and support income convergence with the European Union (EU).
Directors welcomed the authorities’ continued commitment to fiscal consolidation to strengthen resilience and safeguard debt sustainability, and noted that reducing the deficit to 3.5 percent of GDP in 2026 would require credible, concrete measures. Over the medium term, they saw merit in pursuing a more ambitious consolidation path anchored in the fiscal framework. In that context, they underscored the need to reduce tax expenditures, strengthen tax administration, and contain current spending on wages and pensions, and improve the efficiency of public investment. Directors noted that energy related support should be temporary and well targeted to vulnerable households, and recommended phasing out remaining tax reductions. They also stressed the importance of enhancing fiscal transparency and strengthening SOE governance.
Directors agreed that a sufficiently restrictive monetary stance is needed to contain inflation and safeguard the exchange rate peg, and underscored the importance of the authorities’ readiness to act decisively to return inflation durably to levels consistent with price stability. They welcomed the modernization of the monetary policy framework and encouraged further efforts to strengthen liquidity management and the central bank’s autonomy.
Directors welcomed that the financial system remains sound. Noting risks from rapid credit growth and rising real estate exposures, they encouraged continued vigilance and readiness to deploy additional macroprudential measures, if needed. Directors also recommended continuing to align banking legislation with EU standards and further strengthening AML/CFT implementation.
Directors welcomed progress under the EU Reform and Growth Facility and encouraged further efforts to strengthen productivity, governance and anti-corruption frameworks. Advancing labor market, energy sector, and SOE reforms remains important.
It is expected that the next Article IV consultation with the Republic of North Macedonia will be held on the standard 12-month cycle.
READ MORE: https://www.imf.org/en/news/articles/2026/06/05/pr-26187-republic-of-north-macedonia-imf-executive-board-concludes-2026-article-iv-consultation
