ANALYSIS: NATO Membership will “Lift” while COVID-19 will “Destroy” the Economy – – What Awaits Us?

The date for the start of EU accession negotiations and NATO membership is a good signal for investors – the business climate will change significantly, having a positive impact on the economy in the coming period. But the COVID-19 crisis will “pull” the economy down, writes the weekly economic analysis of Portalb.mk. International financial institutions predict a mild recession, domestic economists with optimism – we will remain in a positive zone

 

Author: Aneta Dodevska

 

Forecasts: from growth 1.2% to recession -0.4%….

Uncertain foreign demand, stagnation in some production facilities, expired contracts, uncertainty over procurement of raw materials as a result of the COVID-19 crisis – these are some of the risks pointed out by domestic economists in the latest Survey conducted by the National Bank for Inflation and expectations for the GDP growth in the coming period. Additionally, analysts believe the fact that this year (2020) is an election year should be kept in mind. The early elections have been postponed, but will still take place after the end of the health crisis. Economists believe that all of these factors will melt GDP to 1.2% year-round – which would mean that the economy remains in a positive zone.

Currently, surveyed analysts expect growth of 1.2% in 2020 (downward revision of 2.0 percentage points) and growth of 2.4% in 2021 (downward revision of 1.1 percentage points), while in 2022, a moderate acceleration of the growth rate of 2.9% is expected. Respondents linked the expectations to the global COVID-19 crisis, uncertain foreign demand and its impact on the domestic economy, declining domestic demand and uncertainty over this year’s parliamentary elections, which would reflect via restraints of domestic investors and lower credit activity – stated the Survey.

While COVID-19 will “destroy” economic growth, NATO membership and the date for the start of accession negotiations with the European Union will give a positive incentive. These two historical moments for us, expected for decades, according to economists, however, will be positively felt after the end of the health crisis.

On the other hand, analysts expect that the monetary and fiscal measures, NATO accession, the start of EU accession negotiations, and the resumption of capital projects in road and rail infrastructure will have a positive impact on growth in the coming period – NBM states.

According to the optimistic announcements from the Government, after the end of the latest restrictive measures, with the increase of the duration of the curfew on the territory of the entire country, a gradual return to “life” is expected. But this phase would begin in late April if current measures take effect. Meanwhile, the government has begun implementing emergency economic measures to cushion the negative consequences. World Bank analysts say stronger reforms will be needed to target certain sectors.

Economic and social measures to mitigate the impact of the crisis will be a priority until the pandemic is brought under control, but the post-recession recovery period will require additional fiscal reform, competitiveness reform and public policy management reform to sustainably accelerate economic growth. The World Bank is finalizing its action plan to help North Macedonia deal with and mitigate the impact of the crisis, which includes a new rapid project in response to urgent health sector priorities, but also to protect household incomes, and restructuring already approved projects to mobilize funds to support small and medium enterprises. These programs are expected to amount to about 140 million Euros – said the World Bank.

According to World Bank estimates, growth in 2019 of 3.6 percent was surprisingly high, and unemployment was noted, which dropped to another historically low level as a result of increased employment.

However, the short-term perspective – similar to other countries in the region – is negative due to the COVID-19 crisis, which will cause a recession in 2020 – noted the newly published World Bank Report, which forecasts a recession of 0.4 percent this year.  For next year, 2021, a growth of 3.7 is predicted; while in 2022 there will be a growth of 3.6 percent.

 

 

 

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