Gold prices edge higher with focus on Ukraine-Russia, Jackson Hole
Investing.com -- Fitch Ratings has confirmed North Macedonia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ’BB+’ with a Stable Outlook on March 21, 2025. The rating is supported by the country’s credible and consistent macroeconomic policies, positive governance indicators, and commitment to the EU accession process. However, these factors are offset by the high banking sector euroisation, high net external debt, high structural unemployment, and weak productivity growth.
In 2024, North Macedonia reported a general government deficit of 4.6% of GDP, slightly below the revised target of 4.9% but above the estimated current ’BB’ median of 3%. Fitch predicts a similar deficit in 2025, with a decline to 4% by 2026 due to increases in the revenue base from electronic invoicing progress and grants from the Western Balkans Growth Plan (WBGP).
The authorities have not fully implemented the Organic Budget Law (OBL) in 2025, with adoption planned to start in 2026. The 2025 budget targets a 4% of GDP deficit, above the OBL limit of 3%. Fitch views the absence of a firm fiscal anchor as a constraint on fiscal policy credibility.
Despite external challenges, real GDP growth reached 2.8% in 2024, exceeding estimates due to strong government spending and investment. Fitch projects growth peaking at 4% in 2026. The investment pipeline remains strong, but weak productivity growth and poor demographics will constrain medium-term growth.
The country recorded a current account deficit of 2.3% of GDP in 2024, reflecting a worsening trade balance and a smaller secondary income surplus. However, net Foreign Direct Investment (FDI) soared to a 17-year high of 7.1% of GDP in 2024, reflecting robust investments in free economic zones. Fitch expects continued adequate net FDI coverage of the current account deficits, which are projected to average 2.8% of GDP in 2025-26.
North Macedonia’s net external debt/GDP, at 24.2%, was above the ’BB’ peer median by about 10pp in 2024. Fitch projects international reserves to average 4.3 months of current external payments in 2025-26, supporting the de facto euro peg. The external liquidity ratio remains strong, estimated at 168.4% as of end-2024.
The banking sector is profitable, well-capitalised, with sound liquidity, adequate asset quality and moderate provision levels. Deposit euroisation is relatively high, at 40.6% as of 3Q24, representing a decline from the 2022 peak of 44.5%, but this is partly countered by a broadly matched proportion of foreign-currency (euro) denominated loans.
There has been no significant progress with EU accession talks due to the continued insistence by Bulgaria on constitutional changes by North Macedonia to formally recognise Bulgarians as an ethnic minority. However, relations with most EU members remain positive, and Fitch expects the country to unlock the first tranche of the total envelope of EUR750 million (4.6% of GDP) WBGP funds in 2025.
North Macedonia has an ESG Relevance Score (RS) of ’5[+]’ for both Political Stability and Rights and for the Rule of Law, Institutional and Regulatory Quality, and Control of Corruption. These scores reflect the high weight that the World Bank Governance Indicators (WBGI) have in Fitch’s Sovereign Rating Model. North Macedonia has a medium WBGI ranking at the 51st percentile, reflecting a recent record of peaceful political transitions, a moderate level of rights for participation in the political process, moderate institutional capacity, established rule of law, and a moderate level of corruption.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.