2014 Index of Economic Freedom

Macedonia

overall score68.6
world rank43
Rule of Law

Property Rights35.0

Freedom From Corruption39.6

Limited Government

Government Spending70.7

Fiscal Freedom91.4

Regulatory Efficiency

Business Freedom81.0

Labor Freedom78.8

Monetary Freedom83.5

Open Markets

Trade Freedom85.9

Investment Freedom60.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 2.1 million
  • GDP (PPP):
    • $21.9 billion
    • -0.3% growth
    • 1.9% 5-year compound annual growth
    • $10,579 per capita
  • Unemployment:
    • 31.3%
  • Inflation (CPI):
    • 3.3%
  • FDI Inflow:
    • $134.6 million
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Macedonia’s economic freedom score is 68.6, making its economy the 43rd freest in the 2014 Index. Its overall score has increased by 0.4 point from last year, reflecting improvements in trade freedom, business freedom, and the control of public spending. Macedonia is ranked 20th out of 43 countries in the Europe region, and its overall score is above the world and regional averages.

Macedonia was first assessed in the 2002 Index, and its economic freedom score has advanced since then by nearly 11 points. Its transition to a more open and flexible economic system has been facilitated by substantial restructuring measures, which have been quite comprehensive. Score improvements in nine of the 10 economic freedoms include double-digit gains in fiscal freedom, business freedom, labor freedom, trade freedom, and investment freedom. Once considered a “mostly unfree” economy, Macedonia joined the ranks of the “moderately free” in 2007 and has achieved its highest economic freedom score ever in the 2014 Index.

The banking sector has weathered the global financial crisis relatively well, and monetary stability has been sustained. Systemic weaknesses persist, however, in the protection of property rights and enforcement of anti-corruption measures. The judicial system is weak, undercut by lingering corruption, and vulnerable to political influence.

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Background

The Republic of Macedonia gained its independence from the former Yugoslavia in 1991 and has achieved a considerable degree of political and economic stability in recent years. The Social Democrats called for early parliamentary elections in June 2011, and Prime Minister Nikola Gruevski maintained control in a coalition with the Democratic Union for Integration. Macedonia has fulfilled NATO’s Membership Action Plan, but Greece has unilaterally blocked its accession to the alliance because it objects to Macedonia’s constitutional name. This dispute is expected to delay Macedonia’s accession to the European Union as well.

Rule of LawView Methodology

Property Rights 35.0 Create a Graph using this measurement

Freedom From Corruption 39.6 Create a Graph using this measurement

Corruption is a serious problem, particularly in public procurement. Enforcement of anti-corruption legislation is weak. The government has not implemented a new judicial reform strategy. In a 2012 report, the European Commission noted that little progress has been made on judicial independence, impartiality, and competence. Uncertainties in registering real property and obtaining land titles continue to undermine economic freedom.

Limited GovernmentView Methodology

The personal income and corporate tax rates are a flat 10 percent. Other taxes include a value-added tax (VAT) and a property transfer tax. Overall, tax revenue constitutes 25.6 percent of gross domestic income. Public expenditures are around 31 percent of GDP. Government debt is about 33 percent of gross domestic income. There has been popular opposition to recent increases in government spending.

Regulatory EfficiencyView Methodology

Procedures for launching a business have been streamlined, and licensing requirements have been reduced, but licensing can cost over five times the level of average annual income. Labor codes lack flexibility, discouraging dynamic job creation. The government has tried to maintain fiscal discipline to bolster its case for eventual membership in the euro-zone, but in 2013, it increased spending on agricultural subsidies, social transfers, and pensions.

Open MarketsView Methodology

Macedonia’s average tariff rate is 2 percent. There are few non-tariff trade barriers, and the government does not discriminate against foreign investors. The financial sector has strengthened in recent years, with the government’s role limited primarily to regulatory enforcement. Bank competition has increased, and the foreign presence in the financial system accounts for more than 70 percent of total bank assets.

Country's Score Over Time

Bar Graph of Macedonia Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Macedonia to other economic country groups

Regional Ranking

rank country overall change
1Switzerland81.60.6
2Ireland76.20.5
3Denmark76.10.0
4Estonia75.90.6
5United Kingdom74.90.1
6The Netherlands74.20.7
7Luxembourg74.20.0
8Germany73.40.6
9Finland73.4-0.6
10Sweden73.10.2
11Lithuania730.9
12Georgia72.60.4
13Iceland72.40.3
14Austria72.40.6
15Czech Republic72.21.3
16Norway70.90.4
17Belgium69.90.7
18Armenia68.9-0.5
19Latvia68.72.2
20Macedonia68.60.4
21Cyprus67.6-1.4
22Spain67.2-0.8
23Poland671.0
24Hungary 67-0.3
25Albania66.91.7
26Slovakia66.4-2.3
27Malta66.4-1.1
28Bulgaria65.70.7
29Romania65.50.4
30Turkey64.92.0
31Montenegro63.61.0
32Portugal63.50.4
33France63.5-0.6
34Slovenia62.71.0
35Italy60.90.3
36Croatia60.4-0.9
37Serbia 59.40.8
38Bosnia and Herzegovina58.41.1
39Moldova57.31.8
40Greece55.70.3
41Russia51.90.8
42Belarus50.12.1
43Ukraine49.33.0
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