Page 119 - bne IntelliNews Southeastern Europe Outlook 2025

6.8 Budget and Debt – North Macedonia
According to the European Commission, the general government deficit is expected to account for 4.8% of GDP in 2024, narrowing to 4.1% in 2025.
Despite this, fiscal pressures have intensified. While public revenue growth was robust, spending overruns are projected to result in a significantly higher fiscal deficit for 2024 than initially anticipated. The deficit is now expected to decline to 3% of GDP only by 2027, highlighting the protracted nature of fiscal consolidation.
Fitch projects the deficit to moderately reduce to 4.3% of GDP in 2025 and 3.8% in 2026.
North Macedonia’s Prime Minister Hristijan Mickoski announced that his government is prioritising "real capital investments" aimed at enhancing infrastructure across the country, with a strong focus on supporting municipal projects and completing strategic corridors.
Mickoski revealed that MKD50.5bn (€821mn) has been allocated in the 2025 national budget specifically for infrastructure improvements, including new motorways, water pipelines and sewer systems.
According to Fitch, the new deficit target makes adherence to the organic budget law, which mandates annual deficits not exceeding 3%, highly improbable until at least 2026. North Macedonia's tax revenue base remains limited by a sizable shadow economy, and efforts to increase revenues through measures like expanded electronic invoicing, as planned by the government, will require time to yield results. Meanwhile, unfavourable demographic trends contribute to a rigid expenditure base.
North Macedonia established a fiscal council in 2023; however, the fiscal rules are set to be implemented starting in 2025.
Fitch said that North Macedonia's general government debt (excluding public guarantees), stood at 52.1% of GDP in the first half of 2024. Fitch projects a steady increase in this ratio, with government debt expected to exceed the 60% limit set by the organic budget law by 2027. However, the risks to public debt are mitigated by a significant share of concessional borrowing, keeping interest costs at 5.1% of government revenue – around half the peer median level. The implementation of a credible medium-term strategy to consistently reduce deficits will be crucial for stabilising the debt trajectory.
119 SE Outlook 2025 www.intellinews.com