Macedonia anticipates visa liberalization as of 1 Jan 2010


Starting EU accession talks, visa regime liberalization and decentralization in IPA funds management are the three priorities of Macedonia. The country’s Prime Minister, Nikola Gruevski, presented them at his Wednesday meeting with European Enlargement Commissioner Olli Rehn.

At their meeting, Gruevski and Rehn also discussed judicial reforms. The Macedonian PM announced that the country would adopt a strategy and an action plan and legal amendments would follow soon after. Gruevski said that Macedonia anticipated visa regime liberalization as of January 1st 2010.

The European Commission should have released on Monday its report assessing the reforms that are necessary for lifting the visa requirements for the Western Balkans. However, the finalized version of the report is set to be released after the meeting of the representatives of the EU member states on 25th May 2009. In this case, it will not be until the beginning of June that any recommendation regarding the visa liberalization of the country could be made or expected.



Analysis and forecast (↓ decreasing risk)


The dialogue on the liberalization of the visa regime of the EU toward the Republic of Macedonia started more than a year ago in Skopje. During its course, the EC presented a roadmap for the Republic of Macedonia, which contained criteria regarding the security of documents, border management, asylum and migration, public order and security, as well as foreign relations and human rights that needed to be fulfilled in order to obtain the visa liberalization.

After the March elections, which were seen as one of the key benchmarks for assessing Macedonia’s democratic credibility, went well and the progress in the abovementioned areas regarding the EU visa requirements was taken into account, Macedonia is expected to be well on the way towards liberalization or, at least, it is presented to be that way.

It is obvious that the EC uses the carrot and stick approach toward Macedonia. After its serious warnings before the elections, it is now seizing the opportunity to encourage Macedonia to continue taking steps toward reform through the visa liberalization idea. Although it is not yet certain if it will be accomplished within the given deadline, it is going to motivate positively Macedonian authorities to further the country’s progress on the roadmap that the EC had presented them with.



Macedonia sees a 41% decline in FDI



Foreign direct investment (FDI) in Macedonia fell by nearly 41% on the year to EUR 53.7 million for the first two months of 2009, Macedonian Central Bank statistics showed. Preliminary data on the current account deficit turned out to be negative again. The current account deficit has doubled for the first two months of the year, reaching EUR 208 million. Meanwhile Macedonia did not make a new arrangement with the International Monetary Fund (IMF) during the Fund’s visit to the country in mid-May. “The Fund stands ready to support Macedonia in whatever way is most helpful. The Fund is willing to discuss with the authorities the provision of technical assistance, policy advice, or financial support”, the official statement by the staff visit said.


Foreign Direct Investment in Macedonia (million EUR)


Source: National Bank of the Republic of Macedonia


Analysis and forecast ( increasing risk)


As Political Capital already projected, the structure of the Macedonian economy may cause difficulties for the Balance of Payments adjustment through 2009. The relatively undiversified structure of the exports will suffer most from the current world economic downturn, and exports are expected to shrink more than imports despite a slowdown in domestic demand and the decrease in the import oil prices. The Balance of Payments financing will definitely be a challenge for Macedonia in 2009 on the back of falling remittances and FDI. Political Capital projects that Macedonia will not be able to avoid applying for an IMF loan later this year; therefore the question is not whether Macedonia should ask the IMF for help, but when it will do that and what the necessary amount of financial help will be. The country can borrow up to EUR 100 million from the Fund without making an arrangement which would put it under stricter fiscal supervision. Keeping the stability of the currency may prove more costly, and we think that the apparent reluctance of local authorities may aggravate the situation in the second half of the year.

Foreign Direct Investment in Macedonia (million EUR)