Zoran Stavreski, Minister of Finance
Zoran Stavreski, Minister of Finance

Macedonia’s Ministry of Finance sets fiscal policies, maintains macroeconomic stability, coordinates efforts to improve the business environment, establishes the state budget and manages public spending. Zoran Stavreski, Minister, discusses his ministry’s strong track record and current projects.

European Times: What are some recent developments in Macedonia’s public-sector finances?

Zoran Stavreski: To cope with the European economic crisis, Macedonia adopted fiscal policies designed to boost domestic demand and consumption while at the same time increasing capital expenditures and gradually increasing wages, pensions and social programmes. These polices proved very effective in helping Macedonia weather the crisis. Macedonia has maintained strong macroeconomic fundamentals for many years, including a low budget deficit and low to moderate public debt of 45.8% as well as government debt of 38%. These are among the lowest debt rates in Europe. Greece’s debt, in comparison, is 175%. Macedonia achieved average GDP growth of 2.5% from 2010 through 2014, with 3.9% GDP growth in the first three quarters of 2014. This was the second-highest growth rate in Europe for that period.

European Times: What were the main factors behind this growth?

Zoran Stavreski: The main factors were increases in both investments and exports. Investments grew by 17% last year while exports grew by 15.3%. Macedonia has stepped up its efforts to attract FDI while also increasing capital expenditures and implementing major infrastructure projects which will not only create jobs but enhance the country’s long-term competitiveness. Macedonia has also greatly improved its business climate by streamlining procedures, implementing regulatory reforms, creating one-stop-shop services for investors and adopting a flat 10% tax on personal income and profits, with zero tax if profits are reinvested. We have also created additional incentives for investors in free economic zones. These efforts have brought more FDI to Macedonia and helped us reduce the unemployment rate by 10% since 2006. Around 11,000 new jobs have been created in Macedonia’s free economic zones and we expect around 13,000 more jobs to be created in these zones over the next three years. Macedonia obtained a €350 million loan from the EIB to support SMEs, which has helped to create an additional 6,000 jobs.

European Times: What are the Ministry of Finance’s accomplishments that you are most proud of?

Zoran Stavreski: Macedonia implemented policies in 2009 to cope with the European economic crisis, and five years later the EU recommended these same policies for other countries. Today, Macedonia is the only European country which has a trade surplus with Germany. This is the result of significant FDI from Germany in projects to manufacture auto components in Macedonia for export to the German market, which demonstrates Macedonia’s attractiveness for EU investors. I am also very proud that Macedonia’s macroeconomic fundamentals are strong. Reducing the state debt to 45% shows that we have been very conservative and disciplined when it comes to spending. This careful approach has helped Macedonia to avoid the pressures that many other countries are facing, for example austerity measures or the rapid consolidation of public finances.

European Times: What is your ministry’s biggest challenge?

Zoran Stavreski: Continuing to reduce unemployment and stimulating the development of local companies so that they can supply foreign investors are two of our current priorities. Although we reduced the unemployment rate by 10% between 2006 and 2014 to reach 27.9%, this is still high. We hope to reduce the rate to 23% by 2018. To help encourage foreign investors to work with domestic companies, the Ministry of Finance has launched a pilot project with the Ministry of the Economy, other government organisations, the World Bank and the IFC. This project will identify domestic companies with potential to partner with foreign investors, analyze the needs of foreign companies in Macedonia, and try to bring the two together. External challenges for Macedonia include the situation with Greece as well as the economic stability of Europe as a whole.

European Times: What are some of your other projects?

Zoran Stavreski: Macedonia has several major infrastructure projects in the works, including three key highways and a railway to Bulgaria and Albania. In addition, Macedonia is investing in education and healthcare with the help of our international partners and has launched energy projects with funding from the state and from international financial institutions. Macedonia’s government is committed to inclusive growth and is focusing on job creation. We have implemented new incentives for companies to hire young people and members of vulnerable groups and we are working to stimulate job creation in the construction sector, which has been reaching double-digit growth; the agriculture sector, through subsidies and various incentives; and the industrial sector, through improvements in the business climate. The World Bank, with which Macedonia has been cooperating for 20 years, as well as the EBRD, the EIB, the Council of Europe Development Bank, KfW Development Bank and other international organisations have demonstrated their confidence in Macedonia and will continue to be strong partners in many important projects.

European Times: How do you expect Macedonia’s economy to evolve over the next few years?

Zoran Stavreski: Macedonia will achieve solid growth rates over the coming three years thanks to our economic model, which has already been proved to work in challenging times. I also anticipate continued growth in FDI, job creation and exports. Exports by companies operating in Macedonia’s free zones totalled €1.17 billion in 2014, or one-third of the country’s total exports, and many of these companies have not yet reached their full potential. The Ministry of Finance anticipates 4% to 4.5% annual GDP growth for Macedonia between 2015 and 2017, although external factors might cause us to change some of our projections. Longer-term, Macedonia has made a commitment to even stronger fiscal consolidation through constitutional amendments. We aim to reduce the budget deficit to 3% and public debt to 60% by 2017.

European Times: Why should foreign investors choose Macedonia?

Zoran Stavreski: Macedonia offers many investment opportunities, skilled labour, a favourable tax rate and diverse investment incentives, including a new free financial zone designed to attract FDI in the financial sector. Macedonia’s healthy economy is a major draw. Investors who have chosen Macedonia are increasing their investments here, for example by making new investments of €30 million to €40 million. These new investments are the clearest possible vote of confidence in Macedonia as a business base. Foreign investors already present in Macedonia praise the country’s stability, predictable policies, commitment to reforms (Macedonia is ranked among the world’s top ten reformers), transparency, efforts to fight corruption, and significant improvements in the business climate. For example, Macedonia has raised its ranking in the World Bank’s “Doing Business” report from 94 in 2006 to 30.

European Times: What is your personal message to potential investors?

Zoran Stavreski: Macedonia will continue to work towards EU integration and to welcome FDI, particularly in projects which create jobs and bring in new technologies and know-how. Macedonia’s economy is dynamic, flexible and resilient. Potential investors should not only look at what Macedonia promises to do but at what the country has already accomplished. Our track record demonstrates our drive to upgrade the business climate and support FDI. If investors are looking for a very business-friendly environment with efficient government services and attractive costs, they should take a closer look at Macedonia.