2017 Index of Economic Freedom

Macedonia

overall score70.7
world rank31
Rule of Law

Property Rights67.0

Government Integrity52.0

Judicial Effectiveness61.4

Government Size

Government Spending68.9

Tax Burden91.9

Fiscal Health72.6

Regulatory Efficiency

Business Freedom81.5

Labor Freedom66.7

Monetary Freedom80.8

Open Markets

Trade Freedom86.1

Investment Freedom60.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 2.1 million
  • GDP (PPP):
    • $29.0 billion
    • 3.7% growth
    • 2.4% 5-year compound annual growth
    • $14,009 per capita
  • Unemployment:
    • 26.9%
  • Inflation (CPI):
    • -0.2%
  • FDI Inflow:
    • $174.2 million
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Improvements in Macedonia’s regulatory framework have created a stable environment for foreign and domestic investment, but political instability has undercut vibrant growth. Although Macedonia depends primarily on economic activity in service sectors, new investment in automotive parts manufacturing is helping to diversify the economy. Businesses benefit from competitive flat tax rates and an open trade regime.

Greater structural reform is still needed, especially in the area of government corruption and bureaucracy. The legal framework is sound, but enforcement is slow and weak. Frequently changing business regulations and selective law enforcement hinder the confidence of foreign investors.

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Background

Macedonia gained its independence from the former Yugoslavia in 1991. Nikola Gruevski of the conservative Internal Macedonian Revolutionary Organization–Democratic Party for Macedonian National Unity resigned as prime minister in January 2016, embroiled in a wiretap scandal. Emil Dimitriev is serving as interim prime minister. The VMRO-DPMNE had prevailed in the April 2014 presidential and parliamentary elections in a coalition with the Albanian Democratic Union for Integration. The Social Democratic Union of Macedonia, the main opposition party, disputed the results and boycotted parliament. Macedonia completed NATO’s Membership Action Plan in 2008, but Greece continues to block its accession because it objects to Macedonia’s name. This dispute is also delaying Macedonia’s accession to the European Union.

Rule of LawView Methodology

Property Rights 67.0 Create a Graph using this measurement

Government Integrity 52.0 Create a Graph using this measurement

Judicial Effectiveness 61.4 Create a Graph using this measurement

Although the legal basis for protecting the ownership of movable, intellectual, and real property exists, implementation remains incomplete. The legal framework is sound, but law enforcement is weak, and the public doubts the government’s willingness to prosecute corrupt officials. Political interference, inefficiency, cronyism, and corruption are pervasive.

Government SizeView Methodology

The individual income and corporate tax rates are a flat 10 percent. Other taxes include a value-added tax and a property transfer tax. The overall tax burden equals 24.6 percent of total domestic income. Government spending has amounted to 32.2 percent of total output (GDP) over the past three years, and budget deficits have averaged 3.9 percent of GDP. Public debt is equivalent to 38.6 percent of GDP.

Regulatory EfficiencyView Methodology

Streamlined processes for business formation and operation provide an environment that is fairly conducive to private investment and production. After years of high unemployment, recent reforms have focused on making the labor market more flexible. Almost half of government spending is allocated to social transfers designed in part to shore up support for the ruling parties. Subsidized hospitals are being built to attract “medical tourists.”

Open MarketsView Methodology

Trade is extremely important to Macedonia’s economy; the value of exports and imports taken together equals 113 percent of GDP. The average applied tariff rate is 2.0 percent. In general, foreign and domestic investments are treated equally. State-owned enterprises distort the economy. The financial sector has become more dynamic. Bank competition has increased, and the foreign presence accounts for more than 80 percent of total banking-sector assets.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Switzerland81.50.5
2Estonia79.11.9
3Ireland76.7-0.6
4United Kingdom76.40.0
5Georgia763.4
6Luxembourg75.92.0
7The Netherlands75.81.2
8Lithuania75.80.6
9Denmark75.1-0.2
10Sweden74.92.9
11Latvia74.84.4
12Iceland74.41.1
13Finland741.4
14Norway743.2
15Germany73.8-0.6
16Czech Republic73.30.1
17Austria72.30.6
18Macedonia70.73.2
19Armenia70.33.3
20Romania69.74.1
21Poland68.3-1.0
22Kosovo67.96.5
23Bulgaria67.92.0
24Cyprus67.9-0.8
25Belgium67.8-0.6
26Malta67.71.0
27Hungary 65.8-0.2
28Slovakia65.7-0.9
29Turkey65.23.1
30Albania64.4-1.5
31Spain63.6-4.9
32France63.31.0
33Portugal62.6-2.5
34Italy62.51.3
35Montenegro62-2.9
36Bosnia and Herzegovina60.21.6
37Croatia59.40.3
38Slovenia59.2-1.4
39Serbia 58.9-3.2
40Belarus58.69.8
41Moldova580.6
42Russia57.16.5
43Greece551.8
44Ukraine48.11.3
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