Each spring the financial elite from around the world traditionally gathers in Washington within the spring meetings of the World Bank and the IMF. Finance Ministers and central bank governors with their aides, bankers and investors, professors and scientists… various worldly people with their various financial, economic, political and other interests. They, together and at one place within 3-4 days, discuss the current and long-term problems of the global and regional economies, exchange opinions, arrange financial arrangements, investments, economic policies and loans, as well as hold formal meetings. Everyone with their ideas, problems and trusted mandates are trying to shape the world in the future, or at least the economy of the world in the future. The number of events is so high and with such a frequency that it is simply impossible to have insight into one percent of everything that is happening there. That’s why delegations and individuals arrive there with very detailed and solid agendas of meetings and gatherings that have been previously arranged. Without them, the spring meetings of the World Bank and the IMF in Washington are just a waste of time and futile, wandering from one to another event without any purpose. It probably was this year too. Spring meetings were held last week and ended last weekend. They are always a good opportunity to promote and a very large number of publications from various institutions and authors that have been specifically or accidentally issued in that period, especially those corresponding by the WB and the IMF.
One such publication of the World Bank, which has a reference date for its issuance – spring 2019, is entitled “Financial Inclusion” with the subtitle “Europe and Central Asia Economic Update”, prepared by the office the Chief Economist of the World Bank. It is important for Macedonia and the Macedonian economy because it informs us and warns us about at least two or three important economic and political aspects of our life. However, it is first necessary to say a few important words about the technical details (apparently technical) in the publication that is shocking truth about the lack of perception and neglect of one of the most important UN institutions, and that is the World Bank at a time when it is headed by the interim President of our neighbor Bulgaria. A few days ago a new WB presidency was elected with a regular mandate, traditionally originally from the United States, but the publication was previously issued.
Namely, as the first in this publication, all states are presented with their name and without a determinant of their state regulation, except ours. For instance, Belgium, Germany, Croatia, Lithuania, Serbia, etc., but our country is represented as the Republic of North Macedonia, which is particularly striking and unusual. As if they are dealing with some special case in which there is still something controversial, that is, it seems that with the addition of the North, they stuck the Republic in our representation, as something that is absolutely necessary and which in the future will make some exception. Secondly, it is even more remarkable that in the codes of the countries in the publication, besides the fact that the Republic is the only country in our country, the code that is put is FYROM (Former Yugoslav Republic of Macedonia).
But let’s look at the more essential sections of the publication. It directly warns and elaborates that the region of Europe and Central Asia, together with us, will face several challenges, including reducing economic growth. Something from which the world economy probably will not get out. But that’s the minor problem. Major troubles are those in relation to long-term developmental problems and are represented by aging of the population and substantial worsening of the age structure that will contribute to serious problems with the working and active population, problems with reducing productivity and the level of investments and climate change. Only the naive ones can say to themselves – these are not such big problems. It is expected that the growth of the world economy in the coming years will be in the range of about 2.8 percent a year, and the most developed economies will grow with only about 1.5 percent. Within this framework, economic activities will take place in our narrower and wider region, but this will happen with prolonged absolute decrease in the population. A problem for which there is no solution yet, except for what we already see in the developed part of the European continent – the opening of borders for immigration of working-age population from other parts of the world.
When this is added to the trends of productivity reduction, the prospects seem even worse. WB measured that in the last 5 years (2013-2017), the overall productivity factor (TFP) in the region has slowed down by 0.8 percent annually, with a tendency to continue because of the decline in FDI inflows, sectoral restructuring and slowing reform momentum combined with the shrinking business dynamism and the absence of growth in productivity stemming from new technologies. This, together with the reduced investment and climate threats, and in the absence of policies for the long-term challenges of economies, are very serious indications of our future. Let’s not think that our small, weak and full of problems Macedonian economy is out of these trends. Unfortunately, the data show that we are in the very epicenter of such problems and we will soon have even more dramatic confrontation with them.
This adds our specific problems arising from our specific internal economic conditions. Among them there are several more alarming. In spite of all expectations, the Macedonian economy in the future medium-term period will practically be locked in the growth rates of around 3%, for which there is a consensus that the growth dynamics of our economy is quite insufficient, which will not seriously reduce the relatively high unemployment or poverty in the country. A somewhat faster growth is expected in construction, and only because of the continuation of, de facto, the stopped public works on motorways in the last year and their completion in the next 2-4 years. But given that they are performed with foreign loans, it is undoubtedly that there will be a withdrawal of larger credits and, therefore, budget deficits, because of which we will continue to be locked at the relatively high rate of around 2.5-3, 5 percent annual deficit as a share of GDP, with certainty that it will increase our public debt to the level of about 55 percent of GDP, a condition that is a bit desirable and actually very contentious and criticized both in the country and abroad. The reduction in the construction due to the one-off effects is likely to be offset somewhere in the future by reinvesting the benefits from the existing FDI in the country due to the medium-term export demand for the respective products, but this will not compensate for much of the inability to create growth in other market sectors, especially from inefficiency in the public sector. In such conditions, the dependence on export demand on current FDI and productivity growth will multiply, and this brings many risks in the long run.
Finally, if we don’t have long-term and relatively consensual responses to economic policy for these problems and challenges, then the future will not be very bright.