2015 Index of Economic Freedom

Macedonia

overall score67.1
world rank53
Rule of Law

Property Rights35.0

Freedom From Corruption44.0

Limited Government

Government Spending65.6

Fiscal Freedom91.4

Regulatory Efficiency

Business Freedom79.2

Labor Freedom70.7

Monetary Freedom79.0

Open Markets

Trade Freedom86.2

Investment Freedom60.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 2.1 million
  • GDP (PPP):
    • $22.6 billion
    • 3.1% growth
    • 1.5% 5-year compound annual growth
    • $10,904 per capita
  • Unemployment:
    • 29.7%
  • Inflation (CPI):
    • 2.8%
  • FDI Inflow:
    • $333.9 million
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Macedonia’s economic freedom score is 67.1, making its economy the 53rd freest in the 2015 Index. Its overall score has decreased by 1.5 points since last year, with improvements in freedom from corruption and trade freedom outweighed by declines in labor freedom, business freedom, the management of government spending, and monetary freedom. Macedonia is ranked 24th out of 43 countries in the Europe region, and its overall score is above the world and regional averages.

Macedonia’s transition to a more market-based economy has been facilitated by relatively high social and political stability that has enabled the economy to adapt to comprehensive reform measures. Over the past five years, Macedonia’s economic freedom has advanced by 1.1 points with notable score improvements in half of the 10 economic freedoms, including business freedom, freedom from corruption, and trade freedom.

Macedonia has made considerable progress in income growth and overall poverty reduction. Competitive flat tax rates and a permissive trade regime, buttressed by a relatively efficient regulatory framework, have encouraged the emergence of a dynamic private sector. Implementation of deeper institutional reforms will be critical to ensuring more dynamic long-term development.

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Background

The Republic of Macedonia gained its independence from the former Yugoslavia in 1991 and has achieved considerable political and economic stability. Prime Minister Nikola Gruevski of the conservative party VMRO-DPMNE prevailed in the April 2014 presidential and parliamentary elections in a coalition with the Democratic Union for Integration. Macedonia completed NATO’s Membership Action Plan in 2008, but Greece continues to block its accession to the alliance because it objects to Macedonia’s name. This dispute is delaying Macedonia’s accession to the European Union as well. Macedonia is a developing country with a substantial fiscal deficit, but its economy is growing. Improvements in the legal framework are creating a stable environment for foreign and domestic investment.

Rule of LawView Methodology

Property Rights 35.0 Create a Graph using this measurement

Freedom From Corruption 44.0 Create a Graph using this measurement

Corruption and cronyism are prevalent in public administration and procurement procedures, increasing costs for businesses and chilling foreign investment. Macedonia remains an important transit and destination point for human trafficking to Western Europe, as well as for the smuggling of arms, drugs, and stolen cars. Registering real property and obtaining land titles continue to be difficult.

Limited GovernmentView Methodology

Individual and corporate income tax rates are a flat 10 percent. Other taxes include a value-added tax and a property transfer tax. Tax revenue constitutes 25.6 percent of domestic income, and government spending accounts for 33.8 percent of the domestic economy. Public debt is equal to about 36 percent of gross domestic product.

Regulatory EfficiencyView Methodology

Forming a business takes two procedures and two days, with no minimum capital required, but completing licensing requirements remains relatively time-consuming. The labor market lacks flexibility, hindering more dynamic job growth. The state has tried to maintain fiscal discipline to bolster its case for eventual membership in the eurozone, but spending on agricultural subsidies increased again in 2014.

Open MarketsView Methodology

Macedonia’s average tariff rate is 1.9 percent. The country has worked to reduce trade barriers since joining the WTO. Non-tariff barriers are relatively low, and foreign and domestic investors are generally treated equally. The financial sector has been restructured. The banking sector is more open to foreign banks and has withstood the global financial turmoil relatively well. The capital market is evolving.

Country's Score Over Time

Bar Graph of Macedonia Economic Freedom Scores Over a Time Period

Country Comparisons

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Regional Ranking

rank country overall change
1Switzerland80.5-1.1
2Estonia76.80.9
3Ireland76.60.4
4Denmark76.30.2
5United Kingdom75.80.9
6Lithuania74.71.7
7Germany73.80.4
8The Netherlands73.7-0.5
9Finland73.40.0
10Luxembourg73.2-1.0
11Georgia730.4
12Sweden72.7-0.4
13Czech Republic72.50.3
14Iceland72-0.4
15Norway71.80.9
16Austria71.2-1.2
17Latvia69.71.0
18Belgium68.8-1.1
19Poland68.61.6
20Cyprus67.90.3
21Spain67.60.4
22Slovakia67.20.8
23Armenia67.1-1.8
24Macedonia67.1-1.5
25Hungary 66.8-0.2
26Bulgaria66.81.1
27Romania66.61.1
28Malta66.50.1
29Albania65.7-1.2
30Portugal65.31.8
31Montenegro64.71.1
32Turkey63.2-1.7
33France62.5-1.0
34Italy61.70.8
35Croatia61.51.1
36Slovenia60.3-2.4
37Serbia 600.6
38Bosnia and Herzegovina590.6
39Moldova57.50.2
40Greece54-1.7
41Russia52.10.2
42Belarus49.8-0.3
43Ukraine46.9-2.4
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