72668 v1 World Trade Indicators 2009/10 Former Yugoslav Republic of Macedonia Trade Brief Trade Policy partners. With the EU countries, which are the other top trading partners, FYR Macedonia has signed a In recent years, the Former Yugoslav Republic (FYR) Stabilization and Association Agreement, and has of Macedonia’s economic policies have emphasized benefited from trade concessions since the liberalization, free trade, regional integration, implementation of the Interim Agreement in June regulatory reform, and reform of the business 2001. Additionally, trade integration was advanced environment. Its trade liberalization was encouraged further through the introduction of diagonal by the country’s accession to the WTO in 2003. Based accumulation of origin of goods for countries in the on its 7.8 percent simple average MFN applied tariff, EU’s Stabilization and Association Process, Turkey, FYR Macedonia’s trade regime appears slightly more and EU member states.2 restrictive than that of an average Europe and Central Asia (ECA) country (6.8 percent), but more liberal than that of an average upper-middle-income country External Environment (9 percent). Based on the MFN applied tariff, it ranks The simple average of the overall rest of the world 79th out of 181 countries (where 1st is least restrictive). tariff (including preferences) faced by the country’s Taking into account preferences, the simple average exports is 9.8 percent. When its trade flows are taken MFN applied tariff is 6.9 percent. Similar to the into consideration, it is apparent that FYR majority of other countries in its comparator groups, Macedonia’s exports have very good access to FYR Macedonia is more protective of its agricultural international markets, especially when compared to the goods (13.9 percent tariff) than of its non-agricultural ECA and upper-middle-income countries. Its goods (6.8 percent tariff). The country’s maximum weighted average rest of the world tariff (including MFN applied tariff, excluding alcohol and tobacco, is preferences) is 0.9 percent, lower than the regional and 64 percent, which is lower than the regional average of income group averages of 2.1 and 3.1 percent, 159.7 percent. The trade policy space, as measured by respectively. Similar to the majority of other countries the wedge between bound and applied tariffs (the in the region, FYR Macedonia’s agricultural products overhang), has decreased to 2.5 percent in 2008 from face a less favorable trading environment (4.3 percent 3.2 percent the year before. In 2009, the government tariff) than its non-agricultural products (0.8 percent started cancelling duties for 286 tariff lines of raw tariff). The Macedonian denar appreciated by 4.6 materials and equipment not produced domestically, percent in real, trade-weighted terms in 2008, making and reducing them for another 212.1 the country’s exporters less competitive abroad. At the FYR Macedonia mostly trades with countries with end of 2008, FYR Macedonia signed an economic which it has free trade agreements. It is party to the cooperation agreement with Bulgaria, which is one of Central European Free Trade Agreement (CEFTA) the top 10 foreign investors in the country.3 with its regional neighbors, which includes Serbia and Montenegro who are among its top five trading Behind the Border Constraints FYR Macedonia implemented reforms in 7 out of the 10 categories of the Doing Business index, resulting in Unless otherwise indicated, all data are as of August 2009 its rank as the third top reformer for 2008/09. and are drawn from the World Trade Indicators 2009/10 Consequently its business environment has improved Database. The database, Country Trade Briefs and substantially and is now ranked 32nd out of 183 Trade-at-a-Glance Tables, are available at countries in the Ease of Doing Business index, http://www.worldbank.org/wti. improving from 69th in 2008. FYR Macedonia’s Logistics Performance Index score, which reflects the If using information from this brief, please provide the extent of trade facilitation in the country, is below the following source citation: World Bank. 2010. “FYR of regional and income group averages, suggesting that Macedonia Trade Brief Trade Brief.” World Trade Indicators the country has a less conducive climate for trade. It 2009/10: Country Trade Briefs. Washington, DC: World Bank. scores 2.43 on a scale of 1 to 5, with 5 being the Available at http://www.worldbank.org/wti. World Trade Indicators 2009/10 Former Yugoslav Republic of Macedonia Trade Brief highest score, while the regional and income group total imports. FDI inflows in 2008 accounted for 6.3 averages are 2.59 and 2.85, respectively. It ranked 90th percent of the country’s GDP. out of 150 in the world and 15th in the ECA region (with Turkey leading the regional group). The logistics indicator in which it performed the best was domestic Notes logistics cost, while its weakest performance was in the 1. Besimi, Fatmir. April 2009. efficiency and effectiveness of customs and other 2. European Union Commission, March 17, 2009. border procedures. However, the authorities in FYR 3. Kostadinov, December 15, 2008. Macedonia have undertaken several measures to 4. IMF, February 2009, p. 9. improve the trading environment (around 50 new 5. World Bank, April 2009. measures were introduced in 2009, such as stronger 6. National Bank of the Republic of Macedonia, 2009a; control over customs and promotion of use of simpler 2009b. procedures), and future rankings of the extent of trade facilitation in the country will likely register an improvement. References Besimi, Fatmir. April 2009. “Policies, measures and Trade Outcomes activities for improvement of the competitiveness.” Republic of Macedonia Ministry of Economy. The trade growth momentum of 11.6 percent over the . real growth (in constant 2000 U.S. dollars) of trade in Economist Intelligence Unit (EIU). 2008. Country Profile: goods and services slowed to 6.7 percent. Real trade growth is expected to turn negative in 2009, with trade Macedonia. EIU. falling by 4.5 percent. Export growth rate decelerated European Union Commission. March 17, 2009. from 11.5 percent over the 2005–07 period to 9.6 “Procedures Relating to the Implementation of the percent in 2008, while import growth decelerated from Common Commercial Policy.” Official Journal of the 11.6 percent to 4.7 percent. Both exports and imports European Union, 2009/C 62/07. are expected to fall in 2009, with a marginally greater International Monetary Fund (IMF). February 2009. IMF fall in imports. Country Report No. 09/60. IMF, Washington, DC. National Bank of the Republic of Macedonia. 2009a. “R. In nominal U.S. dollar terms, trade growth decelerated Macedonia: Import of Goods by Countries.” August to an estimated 18.1 percent in 2008 compared to 36.9 3, 2009. . exports and imports. Exports in particular suffered ———. 2009b. “R. Macedonia: export of goods by due to the recent fall in metal prices, as nickel is the countries.” August 3, 2009. . EU—one of the main export markets for Macedonian Kostadinov, Petar. December 15, 2008. “Bulgaria and products—has been hard hit by the recent recession. Macedonia Sign Economic Co-Operation Agreement.” As such, nominal growth of exports fell from 39 The Sofia Echo. July 21, 2009. . estimated 24 percent. In 2009, both prices and external Sanjay Kathuria, ed. 2008. Western Balkan Integration and demand have plummeted further, while domestic the EU. Washington, DC: World Bank. demand has decreased at a slower rate due to the World Bank. April 2009. “Country Brief 2009: FYR expansionary fiscal policy that the government has implemented since late 2008.5 As a result, while Macedonia.” World Bank, Washington, DC. July 10, exports in the first quarter of 2009 fell by 43.3 percent 2009. . in nominal U.S. dollar terms in comparison to the first quarter of 2008, imports fell by only 27.9 percent.6 The fall in imports was also dampened by the declining price of petroleum, as crude petroleum is the country’s main import, accounting for 12 percent of