Page 62 - SE Outlook Regions 2023

2.8.2 External environment

The current account deficit is expected to amount to 7.4% of GDP in
2022 versus 3.1% of GDP in 2021, as a reflection of the significant
expansion of the energy deficit, according to the central bank.

According to the International Monetary Fund (IMF), the current account
gap is forecast at 6.7% of GDP in 2022 and 4.6% in 2023, following a
gap of 3.5% of GDP in 2021.

The World Bank expects North Macedonia’s current account deficit to
drop to 5% of GDP in 2023 from 9.8% of GDP in 2021 and to drop
further to 3% in 2024.

Imports surged in the first half of 2022, leading net exports into negative
territory.

North Macedonia’s economy imports over 30% of its energy needs and
fully relies on imports for gas and oil. Looking ahead, the external
balance is expected to improve, even as iron and steel manufacturing,
which accounts for some 10% of the country’s total exports, is hit by
elevated electricity and declining metal prices, according to the
European Commission.

The IMF said the trade deficit is projected to exceed 24% of GDP in
2022, compared to 20% in 2021, mostly reflecting higher energy prices.
Some of the terms of trade shock is being mitigated by higher
remittances. As a result, the current account deficit will rise to 7.5% of
GDP in 2022, narrowing to 4.2% of GDP in 2023. In the financial
account, the private sector is expected to continue accumulating foreign
assets, as in other periods of heightened uncertainty, with a faster
growth of household deposits in euros than in local currency. These
balance of payments pressures are expected to be partly offset by
foreign direct investment (FDI) inflows and government borrowing.

North Macedonia’s foreign trade deficit deepened to nearly €3.2bn in
the first ten months of 2022 compared with €2.1bn a year earlier, the

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