Macedonia Economy

Economy

At independence in September 1991, Macedonia was the least developed of the Yugoslav republics, producing a mere 5% of the total federal output of goods and services. The collapse of Yugoslavia ended transfer payments from the center and eliminated advantages from inclusion in a de facto free trade area. An absence of infrastructure, UN sanctions on the down-sized Yugoslavia, one of its largest markets, and a Greek economic embargo over a dispute about the country's constitutional name and flag hindered economic growth until 1996. GDP subsequently rose each year through 2000. However, the leadership's commitment to economic reform, free trade, and regional integration was undermined by the ethnic Albanian insurgency of 2001. The economy shrank 4.5% because of decreased trade, intermittent border closures, increased deficit spending on security needs, and investor uncertainty. Growth barely recovered in 2002 to 0.9%, then rose by a moderate 3.4% in 2003, and is estimated at 1.3% in 2004. Unemployment at one-third of the workforce remains a critical economic problem. Much of the extensive grey market activity falls outside official statistics.