Skopje, 26 September 2025 (MIA) - The European Bank for Reconstruction and Development (EBRD), in its latest Regional Economic Prospects report, has upgraded the Macedonian GDP growth outlook to 3 per cent in both 2025 and 2026, which is an increase of 0.4 i.e. 0.3 per cent, compared to the May forecast.

In the report released on Thursday, the EBRD notes that North Macedonia saw better outturns than expected in the first quarter of 2025, with strong performance of construction and high investment.

"Real GDP growth accelerated to 3 per cent year on year in the first quarter of 2025 and further to 3.4 per cent in the second quarter, primarily driven by construction, manufacturing and trade. During this period, household consumption was supported by rising incomes and moderating inflation, while road construction bolstered investment. Exports recovered in the first half of 2025 following a subdued export performance in the previous year. However, the current account deficit widened by 66 per cent in the same period, reflecting lower surpluses in both services trade and secondary income. Following the removal of profit margin caps on certain staple goods, inflation rose to 4.8 per cent by July 2025 before easing to 4.4 per cent in August.

"Fiscal policy remains expansionary, with the revised 2025 deficit target set at 4 per cent of GDP, aiming to balance fiscal consolidation with ongoing infrastructure investments. The deficit for the period January to July 2025 reached 2.5 per cent of the projected GDP, as expenditures outpaced revenue growth. Real GDP growth is projected at 3 per cent in 2025 and 2026, underpinned by strong domestic demand and the accelerated execution of public investment projects, particularly the construction of motorway sections along Pan-European Corridors VIII and X. Increased municipal investment ahead of local elections in late 2025 may provide a further stimulus in the short term. Household consumption is expected to remain resilient, supported by rising real wages and higher government transfers. Risks to the economic outlook stem from constrained fiscal capacity and external volatility, especially due to structural adjustments in the European automotive industry and heightened global uncertainty," reads EBRD's report on North Macedonia.

As regards growth in the Western Balkans, the report notes that it slowed from 3.6 per cent in 2024 to 2.4 per cent in the first half of 2025. It is expected to pick up to 2.7 per cent in 2025 as a whole and 3.2 per cent in 2026. Downward revisions to forecasts since May 2025 reflect increasing spillovers from slower growth in advanced Europe and weaker-than-expected construction and investment in Serbia.

According to the EBRD, Kosovo sees the highest growth in the region this year, at 3.9 per cent, followed by Albania at 3.5 per cent, Montenegro at 2.6 per cent, Serbia at 2.5 per cent, and Bosnia and Herzegovina at 2.2 per cent.

In the regions covered by the EBRD, growth is expected at 3.1 percent this year. Biggest risks to the economy include geopolitical tensions, U.S. tariffs, competition from China and limited fiscal space.

Photo: MIA / print screen