Republic of North Macedonia: 2023 Article IV Consultation and First Review Under the Precautionary and Liquidity Line-Press Release; Staff Report; and Statement by the Executive Director for Republic of North Macedonia

This paper discusses Republic of North Macedonia’s 2023 Article IV Consultation and First Review under the Precautionary and Liquidity Line (PLL). The authorities are progressing toward PLL objectives, encompassing the safeguarding of public finances, reduction of energy subsidies, addressing high inflation, and ensuring financial stability. The economy is recovering post the surge in energy and food prices triggered by Russia's war in Ukraine. Economic activity in 2023 was driven by strong exports and reduced energy imports, and it is set to strengthen into 2024. Going forward, the authorities’ policy agenda focuses on continued fiscal consolidation to rebuild buffers. In this context, parliament has approved a credible 2024 budget that targets significant fiscal consolidation while preserving space for priority spending. North Macedonia faces significant medium-term challenges. Arresting emigration and boosting productivity are crucial for re-accelerating income convergence with the EU. North Macedonia is also exposed to climate change and will be impacted by the EU-Carbon Broder Adjustment Mechanism. Addressing these challenges requires among others improving the business environment and rule of law, and accelerating the green transition.