FEDERATION OF EURO-ASIAN STOCK EXCHANGES
SEMI ANNUAL REPORT OCTOBER 2006
MACEDONIAN STOCK EXCHANGE
ECONOMIC AND POLITICAL DEVELOPMENTS
Economic and Political Environment
The Republic of Macedonia is a country placed in
the middle of the Balkan Peninsula, with a
population of just over 2 million. In 1991, it
declared its sovereignty from Yugoslavia, and has
since experienced mixed success in liberalizing
its economy. The industrial sector comprises
about 18% of GDP and employs about one-third
of those holding jobs in the formal economy.
The largest components of industrial production
are metals, chemicals and food and beverage
processing. The privatization process is almost
finished and the country has adopted a market
economic system. The primary goals of the
country are accession to the EU and NATO and
on this issue is boosted by a wide consensus of
all Macedonian political factors.
Macedonia’s president is Branko Crvenkovski and
its prime minister is Vlado Buckovski.
Economic Performance
In March 2004, Macedonia submitted a formal
application for candidacy of accession into the
EU. Fiscal, monetary, and structural actions in
future will be tailored toward this goal. After the
answering of the EU questionnaire, the European
Commission suggested the candidate-state
status for Macedonia, which was confirmed by
the highest EU authorities on 16 December 2005.
The current account deficit is driven by a large
deficit on merchandise trade, and by service
transactions with the rest of the world that result
in net payments to foreigners. Macedonia's
current account deficit, unlike many poorer
transitioning countries, is not financed primarily by
loans from multilateral agencies like the World
Bank, European Development Bank and IMF.
Rather, portfolio investment, associated with
privatization activities, has financed the largest
portion of the current account gap. On 1
September 2005 the IMF's executive board
approved a new three-year stand-by arrangement
with Macedonia, which, together with a new World
Bank loan, will set the economic policy framework
for the whole of the forecast period. The IMF and
World Bank agreements require the authorities to
push through structural reforms of the labor
market and the judiciary, and to improve the
functioning of the public administration. These
institutions and the EU will provide Macedonia
with fresh external financing, although, after an
initial disbursement, the IMF arrangement is
intended to be merely precautionary. From the
beginning of 2004 the Government has started
issuing t-bills, and in November 2005 the first
government bond was issued, planning more to
be issued in the future. In December 2005 the
Republic of Macedonia has issued its first euro
bond, which is listed on the London Stock
Exchange.
Real GDP growth (%)
Industrial production growth (%)
Inflation rate (%)
External debt (US$ million)
Total public debt (US$ million)
Foreign currency reserves (US$ million)
Foreign direct investments (US$ million)
Export (US$ million)
Import (US$ million)
In August 2005 Macedonia has been given credit
ratings from the S&P, which are “BB” for the
domestic debt and “BBB+” for the external debt.
In November 2005 Fitch Ratings gave Macedonia
long term credit rating in domestic and foreign
currency “BB” with positive prospects, short term
credit rating “B” and maximal country rating
“BB.”*
Real GDP grew by a lower than expected 2.6%
year on year in the first quarter of 2006, owing to
weak performance in industry. A full-year forecast
for 2006 of 4% growth, supported by continued
growth in bank credit and the expansion of key
services sectors such as transport and retailing is
expected. However, the downside risks to this
forecast have increased in view of Macedonia's
weak first-quarter performance. The VMRO-
DPMNE based its election platform on improving
Macedonia's economic growth. The party's
program envisages real GDP growth rates rising
to 6-8% per year, several percentage points
above the economy's performance in recent
years. These targets look highly optimistic, even
assuming that planned reforms are able to boost
export growth.**
* Macedonian Stock Exchange
** Economic Intelligence Unit Ltd., July 2006
2002 2003 2004 2005 Q3
0.9
-5.3
1.8
1,548
2,025
734
78
1,113
1,878 3.2
4.7
1.2
1,770
2,311
903
95
1,359
2,211 2.9
-2.1
-0.4
1,957
2,505
986
150,1
1,672
2,785 -
8,2
0,4
-
-
1,057
-
1,499
2,265
Source: Macedonian Stock Exchange
Key Information Contacts
Central Securities Depository www.cdhv.org.mk
Securities & Exchange Commission www.sec.gov.mk
National Bank of the Republic of Macedonia www.nbrm.gov.mk
Ministry of Finance www.fin.gov.mk
2004-ORIGINS OF GROSS DOMESTIC PRODUCT (%)
2004-COMPONENTS OF GROSS DOMESTIC PRODUCT (%)
Services
Industry
Agriculture, forestry, fishing & water management
Private consumption
Public consumption
80
56.4
11.9
Imports of goods & services
Exports of goods & services
Gross fixed investment
Changes in stocks
77.9
70
60.5
60
50
31.8
40.2
40
30
20
10
0
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20.8
17.8
3.7