Economy

Macedonia constituted the poorest region of the former Yugoslavia, an economic status still reflected in the present economic standards of the State, among the lowest in the entire Balkan region. In the first years since its independence, Macedonia underwent a considerable contraction in most economic indicators signifying a difficulty in the transition towards market economy undertaken by the Macedonian authorities.
Macedonia has enjoyed a climate of relative political stability since its independence which has definitely helped it to overcome inherent difficulties connected to the regional situation throughout the past decade. The presence of the same coalition for the first eight years since independence, in fact, granted a certain continuity of support to transitional plans.

Structural transformation: privatisation
The process of structural transformation in the Balkans, if compared with the one that has taken place in the rest of post-communist countries is in the end quite peculiar. This is due to the unique economic system inherited by ex-Yugoslav States, the so called �market socialism� in which workers directly shared the firms� management and �equity capital� was �socially owned.

Central to the re-structural planning has been the privatisation process, regulated by the Law on Transformation of Enterprises with Social Capital enacted in June 1993. The change had actually already started with the federal Law on Social Capital under the then Prime Minister Ante Markovic. Declared aims of the process of privatisation are :conversion of �social capital� enterprises into enterprises with defined ownership; moving economy to a stage of more stable and sustainable rate of growth; increase of productivity through mobilisation of citizens� savings; attraction of foreign capital.
By mid 1998, 95% of social and public enterprises had gone through a privatisation process and the rest were underway.

Trade policies influence on import and exports
One of the main transformations of Macedonian economic structure was liberalisation of foreign trade. Trade liberalisation has been achieved through shock-treatment. Almost the totality of imports (98 %) were placed under a free trade regime, and tariffs at levels close to OECD standards. Protectionist measures have been realised only on a periodical basis by the Governments through imposition of quotas aiming at defending the national economy and at preventing mass export of natural resources. On the other hand, subsidies have promoted particular exports in the agricultural sector.
Opening of the market to international trade has determined an impressive export performance, however not accompanied by equally positive scores in trade and current account. The end of the critical situation determined by the Greek embargo and UN sanctions has, in fact, widened the gap between import and exports.

Positive results come from regional policies: Macedonia has signed five Free Trade Agreements with different countries such as FRY, Slovenia, Croatia, Bulgaria, and Turkey which is to be read as a first positive step towards interaction with neighbouring countries. More recently, the European Commission has announced the approval of a Stabilisation and Association Agreement with the Government of FYROM foreseeing a �fully liberalised access� to the EU market.