Macedonia

Politics:

• Analysis

  Macedonia politics: Quick View - Macedonia responds positively to Greece

  Event

  Macedonia has responded positively to a Greek proposal, sent on October 5th, for the two countries to sign a Memorandum of Understanding (MoU) to unblock the long-standing name dispute.

  Analysis

  On November 6th the Macedonian foreign minister, Nikola Poposki, sent a letter to the Greek government responding to the proposal made by his Greek counterpart, Dimitris Avramopoulos. According to the proposal, the two sides would sign an MoU in which they would pledge to respect each other's national sovereignty and territorial integrity; renounce any present or future territorial claims; and commit to carry on negotiations to resolve the stalemate.

  Greece has been opposed to Macedonia's constitutional name, the Republic of Macedonia, since 1991 on the grounds that it implies a territorial claim towards Greece's northern province of Macedonia. This claim has been rejected by Macedonia; however, Greece has blocked Macedonia's Euro-Atlantic integration until the bilateral dispute is resolved.

  The European Commission has largely taken a back seat to the dispute, simply urging the two sides to resolve their differences. The EU's enlargement commissioner, Stefan Fule, has nonetheless stressed the need to lift the Greek veto for Macedonia to begin EU accession talks, which would help to stabilise ethnic relations in the country. In its latest progress report on Macedonia, published in early October, the Commission called for accession talks and name dispute talks to be conducted in parallel, with a solution to the name dispute to be reached in the "early stages" of the membership talks. The latest exchange between Greece and Macedonia could make this proposition a reality.

  Macedonia's EU membership aspirations could, however, face another obstacle. During Mr Fule's visit to Bulgaria last week, the Bulgarian president, Rosen Plevneliev, stated that Macedonia is "not ready" to start accession talks. The possible Bulgarian veto is now threatening to derail the Commission's plans to bring forward proposals for the start of accession negotiations with Macedonia at the December 13th EU summit. Relations between Macedonia and Bulgaria have worsened recently over Bulgarian accusations that Macedonia has discriminated against Macedonian citizens with Bulgarian citizenship, as well as "stealing" from Bulgaria's history.

  November 09, 2012

• Background

  Macedonia: Political forces

  Five parties participate in government

  The government consists of the Internal Macedonian Revolutionary Organisation-Democratic Party of Macedonian National Unity (VMRO-DPMNE), the Democratic Party of Albanians (DPA), the New Social Democratic Party (NSDP), the Democratic Renewal of Macedonia (DOM) and the Party for a European Future (PEI). Between them, these parties control 65 of the 120 seats in parliament. In the cabinet appointed in August 2006, the prime minister, Nikola Gruevski, and seven ministers are from the VMRO-DPMNE; four ministers are from the DPA; and three are from the NSDP. The remaining ministerial positions are divided between smaller parties and independent MPs. Ethnic Albanian ministers are in charge of the health, culture, education and science, and environmental and physical planning portfolios.

  Parliamentary elections
  (no. of seats unless otherwise indicated)
  	2002	2006	% of seats, 2006
  VMRO-DPMNE(ab)	29	45	38(b)
  Democratic Party of Albanians (DPA)	7	11	9
  Social Democratic Alliance of Macedonia (SDSM)(c)	46	32	27(c)
  Liberal Democratic Party (LDP)(c)	13	-	–(c)
  Liberal Party of Macedonia (LP)	5	-	–
  Democratic Union for Integration (DUI)(d)	16	17	14
  Socialist Party of Macedonia (SPM)	1	-	-
  Party for Democratic Prosperity (PDP)(d)	2	-	-
  National Democratic Party (NDP)	1	-	-
  New Social Democratic Party (NSDP)	-	7	6
  Democratic Renewal of Macedonia (DOM)	-	1	1
  Party for a European Future (PEI)	-	1	1
  VMRO-People's Party (VMRO-NP)	-	6	5
  Total	120	120	100.0(e)
  (a) The Internal Macedonian Revolutionary Organisation-Democratic Party of Macedonian National Unity. (b) The VMRO-DPMNE, the LP, the SPM, the Union of Roma, the DOM and the PEI stood together in the 2006 election. (c) The SDSM contested the 2002 and 2006 elections as the leader of the "Together for Macedonia" coalition with the LDP. (d) The DUI and the PDP ran as a coalition in 2006.
  Source: Press reports.

  Download text file (csv format)

  Ethnic divisions dominate politics

  Parties are divided along ethnic and, to some extent, ideological lines. The VMRO-DPMNE and the Liberal Party of Macedonia (LP), as well as the SDSM and the LDP, two opposition parties, are dominated by Macedonians. The VMRO-DPMNE and the VMRO-Narodna faction, which formally broke away from the party in early 2005, are generally regarded as being more nationalistic than the SDSM. In practice, most parties tend to be more moderate in power than in opposition, largely because keeping ruling coalitions together involves not offending ethnic partners in government.

  The VMRO-DPMNE

  The VMRO-DPMNE, the dominant party in the ruling coalition, derives its name from a liberation movement founded in the late nineteenth century. It regards itself as a Christian democratic party, favouring Macedonia's EU and NATO integration, although it is more widely perceived as nationalist and anti-communist. The VMRO-DPMNE won the 1990 election, but has been in opposition for much of the post-independence period. The party has shed much of its nationalist rhetoric, and some of its most prominent hardliners have left. Nevertheless, the party remains more nationalistic than the SDSM, its main Macedonian rival. The VMRO-DPMNE lost some support to a splinter group, the Internal Macedonian Revolutionary Organisation-People's Party (VMRO-Narodna), which has six seats in the current parliament.

  The SDSM

  The SDSM, the senior party in the previous ruling coalition, emerged from the republican branch of the former Yugoslavia's League of Communists and led the government in the first six years of independence together with the ethnic Albanian PDP. While in government in 2002-06 the SDSM emphasised the implementation of the Ohrid agreement, co-operation with international institutions and economic reforms. The SDSM has traditionally been more unified than the VMRO-DPMNE, but has been prone to internal conflict in recent years. In October 2005, Tito Petkovski, a former SDSM presidential candidate, broke away to form the New Social Democratic Party (NSDP). The NSDP won seven seats in the 2006 parliamentary election and is now part of the ruling coalition with the VMRO-DPMNE.

  The DPA

  The DPA won 11 seats in the 2006 election, on 7.5% of the vote. The party was created following a merger between the Party for Democratic Prosperity of Albanians (PDPA) and the People's Democratic Party (NDP) in 1997. The PDPA was established in 1994, after some radical members of the PDP, led by Menduh Thaci and Arben Xhaferi, broke away from the party. Mr Xhaferi is the formal leader of the DPA, but his political effectiveness is thought to be constrained by illness, leaving Mr Thaci to exercise greater responsibility as a spokesperson for the party.

  The DUI

  The DUI is a political offshoot of the NLA, the guerrilla force that initiated the armed conflict in 2001. The DUI confirmed its position as the most popular party among ethnic Albanian voters in the 2006 parliamentary election; its coalition with the PDP won 12.2% of the vote, giving it 17 seats in parliament. However, the DUI failed to reach agreement on entering a coalition with the VMRO-DPMNE. The party's leader, Mr Ahmeti, subsequently warned of negative consequences for inter-ethnic stability in Macedonia. This was seen by many as a thinly veiled threat that the DUI might revert to its militant roots if it remained in opposition. The DUI and the PDP have since announced a boycott of parliament in protest at the failure of the legislature to apply the "Badinter" voting principle (which requires a majority among deputies representing ethnic minorities) to some recently passed laws.

  March 05, 2007

• Structure

  Macedonia: Political structure

  Official name

  The former Yugoslav Republic of Macedonia (provisional, internationally recognised, pending resolution of name dispute with Greece)

  Form of state

  Democratic parliamentary republic

  Legal system

  Based on the constitution of November 17th 1991

  National legislature

  Unicameral Assembly (Sobranie) of 123 members

  Elections

  Last parliamentary election: June 5th 2011; next election due in 2015

  Last presidential election: March 22nd and April 5th 2009; next election due in 2014

  Head of state

  President; currently Gjorge Ivanov, who was sworn in on May 12th 2009

  National government

  Council of Ministers, headed by the prime minister. A coalition government led by the Internal Macedonian Revolutionary Organisation-Democratic Party of Macedonian National Unity was approved by parliament in July 2011

  Main political parties

  Governing parties: Internal Macedonian Revolutionary Organisation-Democratic Party of Macedonian National Unity (VMRO-DPMNE), Democratic Union for Integration (DUI), Socialist Party (SP), Party of United Macedonian Democrats (PODEM). Opposition parties: Social Democratic Alliance of Macedonia (SDSM), Democratic Party of Albanians (DPA), Party for a European Future (PEI), New Democracy (ND), New Social Democratic Party (NSDP)

  Leading members of the government

  Prime minister: Nikola Gruevski (VMRO-DPMNE)

  Deputy prime minister (European integration): Teuta Arifi (DUI)

  Deputy prime minister & finance minister: Zoran Stavreski (VMRO-DPMNE)

  Deputy prime minister (Ohrid implementation): Musa Xhaferi (DUI)

  Deputy prime minister (economic affairs): Vladimir Pesevski (VMRO-DPMNE)

  Key ministers

  Agriculture, forestry & water supply: Ljupco Dimovski (SP)

  Defence: Fatmir Besimi (DUI)

  Education & science: Pance Kralev (VMRO-DPMNE)

  Economy: Valon Saracini (DUI)

  Environment & physical planning: Abdulaqim Ademi (DUI)

  Foreign affairs: Nikola Popovski (VMRO-DPMNE)

  Health: Nikola Todorov (VMRO-DPMNE)

  Internal affairs: Gordana Jankulovska (VMRO-DPMNE)

  Justice: Blerim Bexheti (DUI)

  Labour & social policy: Spiro Risteski (VMRO-DPMNE)

  Local self-government: Nevzat Bejta (DUI)

  Transport & communications: Mile Janakieski (VMRO-DPMNE)

  Speaker of parliament

  Trajko Veljanoski (VMRO-DPMNE)

  Central bank governor

  Dimitar Bogov

  November 05, 2012

• Outlook

  Macedonia: Key developments

  Outlook for 2013-17

  • The VMRO-DPMNE returned to power for a third consecutive term in 2011, ruling in coalition with the largest ethnic Albanian party, the DUI.
  • The government has been unwilling to offer concessions to resolve the dispute with Greece over Macedonia's name, which is an impediment to the opening of Macedonia's EU membership talks and its accession to NATO.
  • Real GDP growth is estimated to have slowed to 0.5% in 2012, reflecting the euro zone recession. Stronger growth is forecast from 2013 onwards as domestic demand recovers.
  • The government will resume efforts to narrow the budget deficit after it widens in 2012-13, supported by a EUR390m (US$550m) precautionary credit line (PCL) with the IMF.
  • Inflation is estimated to fall to an average of 3.5% in 2012 owing to subdued wage growth and high unemployment. Inflation is forecast to moderate further in 2013-17, to an annual average of 2.8%, as cost-push inflation eases.
  • The current-account deficit is estimated to narrow to 2.5% of GDP in 2012. It is forecast to reach 5.6% of GDP in 2017 as stronger growth boosts demand for imports.

  Review

  • In early October the government survived a no-confidence motion by the opposition accusing the VMRO-DPMNE and the DUI of exaggerating inter-ethnic tensions to justify an early election and rally their respective voters.
  • Some EU states, including Germany, have threatened to rescind visa-free travel if Macedonia is unable to curb abuses of the system.
  • The government revised up the budget deficit target for 2012, to 3.5% of GDP, owing to the recession in the first half of the year and larger than expected arrears.
  • In July the current account posted a surplus for the second consecutive month as net current transfers offset the trade deficit.
  • In September consumer prices increased by 5.3% year on year and 1.4% month on month, amid rises in global fuel and food prices.
  • In September industrial output fell (on an unadjusted basis) by 5.6% year on year, following an 8% drop in August and a decline of 4.1% in June.
  • Macedonia is formally in recession after the economy contracted for a second consecutive quarter in April-June. Real GDP contracted by 0.9% year on year, amid tumbling exports and government consumption.

  November 05, 2012

Economy:

• Background

  Macedonia: Education

  Education has suffered since independence

  The quality of education was one of the better features of Macedonia's inheritance from the former Yugoslavia. There were two universities, one in Skopje and one in Bitola, with a wide range of departments, and the overall literacy rate was 94%. Since independence, however, the system has been drained of resources at a time when it needed to reorient the curriculum. At the primary and secondary level, parents have had to contribute to make up the shortfall in resources and teaching materials. Life is also harder for postgraduate students, many of whom in the past would have continued their studies elsewhere in the former Yugoslavia (mostly in Belgrade).

  Graduate numbers have risen

  The number of children completing primary education each year has remained broadly unchanged since independence, at 29,697 in 1990/91 and 28,816 in the 2004/05 academic year, according to the State Statistical Office (SSO). The number of those completing secondary education fell dramatically, from 21,102 in 1990/91 to a low of 15,704 in 1992/93, but subsequently recovered to 24,225 in 2004/05. The number of university graduates fell from 2,500 in 1990/91 to a low of 2,150 in 1994/95, before rising to 4,725 by 2003/04, the latest figures available.

  Education in Albanian improves slowly

  The most controversial issue in this area has been the right of ethnic Albanians to an education in their own language. Provision seems adequate at primary level: in 2004/05 there were 223,876 primary school pupils, of whom 74,200 (33.1%) were taught in Albanian. At secondary level, the number being taught in Albanian more than doubled, from 7,218 in 1994/95 to 19,352 in 2004/05, but this represented only 20.8% of the total number of students enrolled.

  March 05, 2007

• Structure

  Macedonia: Economic structure

  Data and charts: Annual trends charts

  
  

  

  November 05, 2012

• Outlook

  Macedonia: Country outlook

  Macedonia: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: Following a six-month parliamentary boycott by the main opposition party, the Social Democratic Alliance of Macedonia (SDSM), an early general election was held on June 5th 2011. The Internal Macedonian Revolutionary Organisation-Democratic Party of Macedonian National Unity (VMRO-DPMNE) of the prime minister, Nikola Gruevski, was returned to power, although it lost its absolute majority. The largest ethnic Albanian party, the Democratic Union for Integration (DUI), returned as a junior partner in the coalition with the VMRO-DPMNE. The president, Gjorge Ivanov, shares Mr Gruevski's conservative, nationalist outlook, facilitating close co-operation. Underlying political and ethnic tensions mean that politics will remain volatile throughout the forecast period. In August 2012 tensions intensified over VMRO-DPMNE-sponsored legislation extending the privileges for members of the official armed forces who fought in 2001, their families and widows of deceased soldiers. The DUI threatened to leave the coalition if ethnic Albanian guerrilla fighters were not given the same rights. The lack of progress with EU and NATO integration, owing to the long-standing name dispute with Greece, contributes to this volatility.

  ELECTION WATCH: In the parliamentary election in 2011 the VMRO-DPMNE won 39% of the vote, giving it 56 seats in the 123-seat parliament, down from 63 seats previously. Its main rival, the SDSM, won 32.7% of the vote, giving it 42 seats, up from 27 in the previous legislature. The VMRO-DPMNE again formed an alliance with the DUI, which was returned as the largest ethnic Albanian party, with 10.2% of the vote and 15 seats. The other main ethnic Albanian party, the Democratic Party of Albanians (DPA), gained just under 6% of the vote and eight seats.

  INTERNATIONAL RELATIONS: Relations with Greece are likely to remain difficult. The two countries are in dispute over Macedonia's constitutional name, with Greece arguing that it implies a territorial claim to its northern province of the same name. Although the International Court of Justice (ICJ) in The Hague found that Greece's decision in 2008 to block Macedonia's NATO accession was a breach of an accord between the two countries from 1995, it did not advise any legally binding measures. As a result, Greece is likely to continue obstructing Macedonian EU integration. Since 2009 Greece has blocked the EU from setting a date for opening accession talks with Macedonia, which has been a candidate since 2005. The sovereign debt crisis in Greece has pushed resolution of the name dispute down the political agenda, but Greece will continue to insist on a change to Macedonia's official name.

  POLICY TRENDS: Policymakers will remain committed to the informal currency peg, and are seeking to attract increased inflows of foreign direct investment (FDI) to develop the country's limited and undiversified export capacity. The government recognises the need for fiscal prudence in the context of the denar's informal peg to the euro. However, it is also keen to increase capital expenditure on transport and energy infrastructure, to boost economic activity and to make the business environment more attractive to investors.

  ECONOMIC GROWTH: After contracting by 0.9% in 2009, the economy returned to growth in 2010, of 1.8%. Growth strengthened to 3% year on year in 2011, supported by export gains and a recovery in household consumption. Real GDP contracted by 1.3% year on year in the first quarter of 2012 and by 0.9% in the second quarter, amid falling government consumption. Export performance was curtailed by the impact of the euro zone debt crisis on important trading partners. Exports, the principal driver of the economic recovery, are estimated to stagnate in 2012, when the Economist Intelligence Unit estimates that the euro zone will contract by 0.4%. Ongoing austerity and eroding consumer confidence in other core trading partners will also be factors in this deceleration. Export growth will gradually strengthen from 2013 onwards as the country benefits from global demand for commodities.

  INFLATION: In 2011 consumer prices rose by 3.9% year on year, in response to higher international prices for oil and other commodities, including food. Core inflation was a more restrained 1.1%. We estimate that average inflation will moderate to 3.5% in 2012, despite the introduction of a minimum wage; the rise in pensions, public-sector wages and social benefits; and a spike in global food prices in the final four months of the year amid weak harvests. Inflation in 2013-17 is expected to average 2.8% annually as cost-push inflation eases, offsetting the impact of stronger domestic demand.

  EXCHANGE RATES: The denar is informally pegged to the euro at around Den61:EUR1, a rate that the National Bank of the Republic of Macedonia (NBRM, the central bank) is determined to maintain. The denar is allowed to float freely against the US dollar. After strengthening in 2011, it is expected to depreciate over the forecast period to Den49.63:US$1 in 2015, before modestly appreciating to average Den48.8:US$1 in 2016-17. However, the exchange rate against the US dollar has waning importance, except for basic commodities, given the focus on trade links with the EU.

  EXTERNAL SECTOR: The current-account deficit contracted to 6.5% of GDP in 2009, from a record 12.6% in 2008, following weakening domestic demand and lower international oil prices. Despite a 29% rise in the price of dated Brent Blend crude oil in 2010, the current-account deficit contracted to 2.2% of GDP, as export growth was stronger than import growth and workers' remittances increased. As import demand increased in 2011 (the main driver of which was higher prices for oil and food) and export growth weakened from the sharp post-recession rebound in 2010, the current-account deficit widened to 2.7% of GDP. We forecast that the current-account deficit in 2012-13 will be smaller than before the crisis in 2008. We estimate that it will narrow to 2.5% of GDP in 2012. From 2013 onwards, the current account deficit will widen again as economic growth regains momentum and falling unemployment boosts domestic demand for imports. This forecast assumes that workers' remittances remain robust, that the average price for Brent crude oil remains broadly steady at US$111/barrel in 2012, dipping to US$103.4/b in 2013 and rising to US$115/b by 2017, and that food prices moderate.

  November 01, 2012

• Forecast

  Macedonia: 5-year forecast summary

  Outlook for 2013-17: Forecast summary

  Forecast summary
  (% unless otherwise indicated)
  	2012a	2013b	2014b	2015b	2016b	2017b
  Real GDP growth	0.5	1.3	2.0	2.3	2.4	2.6
  Industry (excl construction)	-1.9	2.1	3.3	4.6	5.0	5.8
  Agriculture	0.5	3.0	2.7	2.6	2.8	3.8
  Consumer price inflation (av)	3.5	3.1	2.6	2.5	2.7	3.0
  Consumer price inflation (end-period)	5.5	1.7	2.7	2.5	2.9	3.1
  Central bank 28-day bill rate (av)	4.8	5.6	6.3	6.5	7.0	8.0
  General government balance (% of GDP)	-3.5	-3.5	-3.1	-2.7	-2.4	-2.1
  Exports of goods fob (US$ m)	4,330	4,865	5,574	6,564	7,575	8,837
  Imports of goods fob (US$ m)	-6,265	-6,808	-7,646	-8,936	-10,360	-12,203
  Current-account balance (US$ m)	-240	-283	-329	-446	-501	-683
  Current-account balance (% of GDP)	-2.5	-2.8	-3.2	-4.1	-4.3	-5.6
  External debt (year-end; US$ bn)	6.8	7.0	7.2	7.7	8.1	8.6
  Exchange rate Den:US$ (av)	47.92	48.68	49.06	49.63	48.71	48.80
  Exchange rate Den:€ (av)	61.52	61.46	61.45	61.42	61.37	61.38
  Exchange rate Den:€ (end-period)	61.40	61.28	61.25	61.28	61.35	62.35
  a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts.

  Download the numbers in Excel

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  November 05, 2012

View detailed map

Country Briefing

Land area

25,713 sq km

Population

2,048,619 (end-2008 estimate)

Main towns

Population in '000 (2002 census)

Skopje (capital): 467.3

Kumanovo: 103.2

Bitola: 86.4

Prilep: 73.4

Tetovo: 70.8

Veles: 57.6

Climate

Continental

Weather in Skopje (altitude 240 metres)

Hottest month, August, 25°C (average); coldest month, January, 1°C (average); driest month, February, 20 mm average rainfall; wettest month, April, 65 mm average rainfall

Languages

Macedonian (official); minority languages include Albanian (in official use where more than 20% of population is Albanian-speaking), Serbo-Croat, Turkish and Roma

Weights and measures

Metric system

Currency

The denar was introduced on May 10th 1993. The National Bank of the Republic of Macedonia (NBRM, the central bank) has a target rate for the denar against the euro

Time

One hour ahead of GMT in winter; two hours ahead in summer

Fiscal year

Calendar year

Public holidays

January 1st (New Year), January 7th (Orthodox Christmas), April 16th (Orthodox Easter Monday), May 1st (Labour Day), May 24th (Saints Cyril and Methodius Day), August 2nd (Ilinden uprising/Day of the Republic), August 19th-20th (Ramazan Bajram), September 8th (Independence Day), October 11th (People's Uprising against Fascism), October 23rd (Revolution Day), December 8th (Saint Kliment Ohridski)

When a Macedonian holiday falls on a weekend, the government informs the public, sometimes a few days before the holiday, that a different day will be the "observed" holiday

March 08, 2012