2019 Index of Economic Freedom

Macedonia

overall score71.1
world rank33
Rule of Law

Property Rights65.1

Government Integrity44.7

Judicial Effectiveness60.7

Government Size

Government Spending70.0

Tax Burden91.8

Fiscal Health82.9

Regulatory Efficiency

Business Freedom80.2

Labor Freedom71.5

Monetary Freedom78.7

Open Markets

Trade Freedom82.0

Investment Freedom65.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 2.1 million
  • GDP (PPP):
    • $31.0 billion
    • 0.0% growth
    • 2.7% 5-year compound annual growth
    • $14,914 per capita
  • Unemployment:
    • 22.4%
  • Inflation (CPI):
    • 1.4%
  • FDI Inflow:
    • $256.3 million

Macedonia’s economic freedom score is 71.1, making its economy the 33rd freest in the 2019 Index. Its overall score has decreased by 0.2 point, with declines in trade freedom, monetary freedom, and business freedom exceeding improvements in fiscal health, labor freedom, and judicial effectiveness. Macedonia is ranked 17th among 44 countries in the Europe region, and its overall score is above the regional and world averages.

Macedonia maintained macroeconomic stability after the global financial crisis, but its internal political crisis has hampered economic performance. Fiscal policy has been lax, with unproductive public expenditures, including subsidies and pension increases, and rising guarantees for the debt of state-owned enterprises. Extensive informal economic activity may generate income equivalent to between 20 percent and 45 percent of GDP. Structural reforms are needed to address government corruption and a bloated bureaucracy. The legal framework is sound, but enforcement is slow and weak.

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Background

Macedonia gained independence from the former Yugoslavia in 1991. The center-right VMRO-DPMNE won the most seats in 2016 parliamentary elections but failed to win a majority. Zoran Zaev of the center-left Social Democratic Union became prime minister in 2017 after forging a coalition with two ethnic Albanian parties. The European Union is Macedonia’s principal trade and investment partner, and their economies are intertwined. In a low-turnout September 2018 referendum, voters approved changing the country’s name to Republic of North Macedonia, which could end a long-running dispute with Greece that has blocked membership in the EU and NATO. Pro-Russia President Gjorge Ivanov sided with opponents who called the change a betrayal of Macedonian identity.

Rule of LawView Methodology

Property Rights 65.1 Create a Graph using this measurement

Government Integrity 44.7 Create a Graph using this measurement

Judicial Effectiveness 60.7 Create a Graph using this measurement

Despite the legal basis for movable, intellectual, and real property protection, enforcement is inadequate. Overall, law enforcement efforts are weak and aimed too often at government critics, undermining public confidence in official willingness to prosecute corrupt officials. The government has introduced some anticorruption measures, but political interference, inefficiency, cronyism and nepotism, prolonged processes, and corruption are pervasive.

Government SizeView Methodology

The individual income and corporate tax rates are a flat 10 percent. Other taxes include value-added and property transfer taxes. The overall tax burden equals 24.8 percent of total domestic income. Over the past three years, government spending has amounted to 31.6 percent of the country’s output (GDP), and budget deficits have averaged 3.0 percent of GDP. Public debt is equivalent to 39.3 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 greater labor market flexibility. Almost half of government spending is allocated to social transfers, and in 2018, the government offered subsidies to low-cost air carriers willing to introduce new service to the country.

Open MarketsView Methodology

The combined value of exports and imports is equal to 124.0 percent of GDP. The average applied tariff rate is 4.0 percent. As of June 30, 2018, according to the WTO, Macedonia had four nontariff measures in force. A streamlined regulatory framework facilitates investment, but political instability undercuts vibrant growth. Bank competition has increased, and about 82 percent of adult Macedonians have an account with a formal banking institution.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Switzerland81.90.2
2Ireland80.50.1
3United Kingdom78.90.9
4Iceland77.10.1
5Netherlands76.80.6
6Denmark76.70.1
7Estonia76.6-2.2
8Georgia75.9-0.3
9Luxembourg75.9-0.5
10Sweden75.2-1.1
11Finland74.90.8
12Lithuania74.2-1.1
13Czech Republic73.7-0.5
14Germany73.5-0.7
15Norway73-1.3
16Austria720.2
17Macedonia71.1-0.2
18Latvia70.4-3.2
19Bulgaria690.7
20Malta68.60.1
21Romania68.6-0.8
22Cyprus68.10.3
23Poland67.8-0.7
24Armenia67.7-1.0
25Belgium67.3-0.2
26Kosovo670.4
27Albania66.52.0
28Spain65.70.6
29Slovenia65.50.7
30Portugal65.31.9
31Hungary 65-1.7
32Slovakia65-0.3
33Turkey64.6-0.8
34Serbia 63.91.4
35France63.8-0.1
36Italy62.2-0.3
37Bosnia and Herzegovina61.90.5
38Croatia61.40.4
39Montenegro60.5-3.8
40Moldova59.10.7
41Russia58.90.7
42Belarus57.9-0.2
43Greece57.70.4
44Ukraine52.30.4
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