Country risk: FYR Macedonia faces a fork in the road


Jeremy Weltman
Published on:

Choosing the right path will open up new investment opportunities.

Passions run high, with the nation's future – and investment prospects – at stake

On September 30, citizens of the former Yugoslav Republic of Macedonia will be given the opportunity to vote in a referendum on issues of national importance.

They include whether to pursue Nato and EU membership bids, and as a prerequisite accept an agreement with Greece concerning the change of country name to Republic of North Macedonia.

The latter move is one that would end a dispute lasting almost three decades, but is opposed by nationalists including president Gjorge Ivanov, who resents the constitutional interference, provoking protests.

At stake is the nation’s future and by implication its investment prospects, which have gradually improved, according to Euromoney’s survey of economists and other risk experts, but remain high-risk.

FYR Macedonia ranks 91st out of 186 countries on a total score of almost 40 points from a maximum 100 available, on a par with Barbados, Nigeria and Azerbaijan in the crowd-sourcing survey.

As with most other European nations, the risk score is marked down since the global financial crisis a decade ago, but has been improving during the past year, and is still signalling FYR Macedonia is a safer option than Greece:


There are higher scores for capital access, bank stability, employment and government finances, and for corruption, infrastructure, transparency and government stability since the political crisis caused by a wire-tapping scandal sparked elections at the end of 2016.

On the economy, the European Bank for Reconstruction and Development recognises there are risks to investor sentiment, but is predicting 2.5% GDP growth for 2018 and 3% for 2019, stating: “A recovery is under way in 2018, helped by political stability and the impact of the rising minimum wage and other social protection measures on private consumption.”

Forecasts published earlier in the year from the European Commission present a generally favourable picture too compared with 2017, with improving economic activity, a narrowing current-account deficit, decent employment growth, and investment bolstered by measures in the fiscal budget.

Consequently, more of the country’s citizens believe the country is moving in the right direction, according to a detailed National Public Opinion Poll (NPOP) conducted from late June to mid-July by the Center for Insights in Survey Research, a USAid-funded project of the International Republican Institute.


The survey shows more respondents anticipating economic conditions will improve than get worse, although unemployment, personal financial conditions and the quality of life are showing no discernible upward trends, with the majority only able to buy necessities.

Against that backdrop, the name-change and Nato membership are key investor risks, says Milos Vulanovic, associate professor of finance at EDHEC Business School, and one of Euromoney’s risk survey experts. The EU question is, in his opinion, a more distant issue.

The name change is also prominent among the general population and is cited as the second-most important among a long list of voters’ issues in the NPOP, trailing only the economy.

“What additionally complicates the situation is a very fuzzy referendum question that could give the losing side an argument for street protests after the outcome,” says Vulanovic.

There are other, external risk factors, he mentions, including “possible agreement between Serbia and its former province Kosovo and Metohija on formal recognition, with the exchange of territory based on ethnicity, which could trigger similar demands by Albanians in Macedonia”.

Yet it is the referendum that is presently the main focus of attention, and it is one that seems likely to be approved, according to the NPOP, with 49% in favour and only 22% against, plus a further 13% undecided, with 16% expressing no intention of voting.

If the plebiscite replicates that outcome, it will send out a strong message of intent, and should further improve the country risk profile, as investors look beyond the immediate backlash the referendum outcome could easily foment.