Page 61 - SE Outlook Regions 2023

2.8.1 GDP growth

North Macedonia’s central bank revised downwards the GDP growth
rates for 2022 and 2023 to 2.3% (-0.6 pp) and 2.6% (-0.2pp),
respectively, under the baseline scenario.

The country posted GDP growth of 2.7% in the first three quarters of
2022.

In general, the latest estimates for the economic growth are less
favourable for the next two years under the influence of the war in
Ukraine and deepening energy crisis, which, in turn, has a stronger
impact on growth and inflation prospects.

However, GDP growth is expected to be supported by domestic factors
related to planned investments in infrastructure and capacity expansion
in part of the export sector.

If this support is weaker than expected, taking into account the less
favorable external environment, in the central bank’s second scenario
the economic prospects will amount to 2% and 1.8% for 2022 and
2023.

In terms of the growth structure, a positive contribution is expected from
domestic demand, and negative from net exports.

For 2023, the International Monetary Fund (IMF) projects economic
growth of 3% for North Macedonia. The IMF said that economic
activity is projected to slow going into 2023, driven by a combination of
external and domestic factors. A modest recovery in late 2023 is
projected to follow, as global energy and food prices start to subside.
Risks are firmly on the downside, with slower external demand resulting
from a global recession, a sharper rise in international energy prices,
and a further tightening of financial market conditions being the main
ones.

According to the World Bank, which expects GDP growth of 2.7% in
2023, output growth over the medium term is expected to moderate and
downside risks remain elevated. Disruptions related to the war in
Ukraine, overstretched supply chains, mounting inflationary and wage
pressures and the intensifying energy supply crisis continue to weigh
on the outlook.

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