1. “Making Difference” State and prospects of the Macedonian Economy

2. “Making Difference” About Macedonia Population 2 022 547 (census 2002) Nationalities: 64.2% Macedonians; 25.2% Albanians; 3.9% Turkish; 2.7% Roma; 0.13 Croatian. (census 2002) Parliamentary elections in June 2011 Candidate country for EU membership since 2005. From 2009 European Commission is recommending start of the negotiations, but.... Nominal GDP in 2010 (million EUR) 6,892 GDP per capita (EUR)3,253 GDP per capita (as % of EU 27 average) 34% Real GDP growth in 20100.7% Inflation (average for 2010)1.6% Unemployment (ILO 2010)30.9% Current account (as % of GDP) -2.8% Budget balance 2010 (as % of GDP) -2.7% Gross external debt (as % of GDP) 57.5% External public debt (as % of GDP) 35.1% Exchange rate: MKD/EUR MKD/HRK 61.5 8.4 Source: SSO & NBRM

3. “Making Difference” GDP developments - 1/2 Source: SSO

4. “Making Difference” GDP developments – 2/2 Source: EUROSTAT

5. “Making Difference” GDP – structure – 1/3 Source: SSO

6. “Making Difference” GDP – structure – 2/3

7. “Making Difference” GDP – structure – 3/3 Source: SSO & EUROSTAT

8. “Making Difference” Industry and tourism Source: SSO

9. “Making Difference” Industry and tourism Industry growth by 24.5% in March 11 Number of nights TotalDomesticForeign 1,746,3391,305,891440,448 Number of tourists TotalDomesticForeign 471,836268,951202,885 Source: SSO

10. “Making Difference” Industry (2005=100 timely adjusted) Source: SSO

11. “Making Difference” Industry - structure Structure Non-durable consumer goods39.2% Intermediate goods35.1% Energy18.6% Capital goods4.8% Durable consumer goods2.3% Biggest industrial sectors Electricity, gas, steam12.4% Manufacture of basic metals11.5% Manufacture of food products11.5% Manufacture of wearing apparel11.3% Manufacture of other non-metallic mineral7.5% Manufacture of tobacco5.8% Source: SSO

12. “Making Difference” Fiscal sector From 2006 flat tax (PIT and corporate profits being taxed at 10% and zero tax rate on reinvested profits). Projected revenues for 2011 represents 32.5% of projected GDP. Budget deficit of 2.5% of GDP for 2011 (covered mostly by external borrowing: EUROBONDS and IMF) Public debt in 2010 as a % of GDP 35.1% External debt 60.4% Internal debt 39.6 (crowding out) Central government debt as a % of GDP 24.5% Budget 2010Mil. Euro % Total revenues1323.4 Taxes1173.288.6 Personal Tax144.312.3 Profit tax60.05.1 VAT612.952.2 Excises229.919.6 Customs duties76.66.5 Other taxes49.54.2 Non-tax revenues123.39.3 Other26.92.0 Total expendit.1463.1 Current expend.1279.687.5 Transfers737.457.6 Good/services150.111.7 Salaries344.726.9 Interest47.33.7 Capital expenditu.183.612.5

13. “Making Difference” Financial system - 1/2 18 banks (only one domestic) and 8 saving houses – representing 90% of the financial system. Capital adequacy ratio of 16.1% in Dec. 2010 Non-performing loans of 9.3% in Dec. 2010 Profitability: ROAA = 0.8% ROAE= 7.3% Inflation of 4.8% in April 2011 Source: NBRM

14. “Making Difference” Financial system - 2/2 Banks' weighted lending interest rates is 9.1% Banks' weighted deposit interest rates is 6.7% Interest rate on the CB bills at the end of 2010 reduced to 4%, (historically lowest level). Foreign exchange reserves stable at around EUR 1.9 billion, or 4 months of expected imports. Source: NBRM Fix exchange rate 61.5 MKD = 1 EUR Average loan of 600 Euros per capita BANKS' RESERVE REQUIREMENTS RATIOS Domestic currency10.0 % Domestic currency with FX clause20.0 % Foreign currency13.0 %

15. “Making Difference” Foreign Trade Import coverage by export is 60.6%. Trade deficit in 2010 is 22.5% of the projected GDP. Export structure Manufactured goods classified mainly by material30% Miscellaneous manufactured articles21% Chemical products11.6% Crude materials7.9% Mineral fuels7.8% Tobacco and beverages6.1% Total (selected)84.4 % Source: SSO

16. “Making Difference” Foreign Trade - structure In the exports the most Significant products are: catalysts, iron and steel products (flat-rolled products), clothes, ferro-nickel and petroleum oil preparations. In the imports, the most significant products are: catalyst’s componenets, crude petroleum oils, motor vehicles for transport of persons and electricity. Source: SSO

17. “Making Difference” Foreign Direct Investment FDI from 1997 till 2009 in mill. Euro The Netherlands523.616.7 Slovenia391.212.5 Hungary388.712.4 Greece380.312.1 Austria362.611.5 Switzerland202.16.4 Great Britain110.73.5 Bulgaria92.32.9 Serbia83.72.7 Croatia55.51.8 Source: NBRM

18. “Making Difference” Labor market – unemployment 30.9% 67.3% of unemployed are without or have low qualifications 80% are long term unemployed.. 30 % are 8 and more years unemployed 15-24 = 17.7 % unemployed 25-49 = 64% unemployed 50-64 = 18 % unmeployed Source: SSO & ESA

19. “Making Difference” Labor market – employment 39.9% Activity rate of 57,8% Employed in... 22% public sector 18.8 agriculture 13.6% textile industry 11.1% retail and handicraft 6% construcition Workers/pensioners ratio is 2.4 In Jnauary 2011average: Gross salary of 502 Euro Net salary of 342 Euro Consumer bascet represents 58% of the net wages. Source: SSO

20. “Making Difference” Decentralization Second phase of decentralization where are competences in the field of education, child care, elderly homes and culture are transferred to the LSG. Not clear when will start third phase…….. Fiscal Decentralization: Percentage of VAT revenues was increased from 3% to 4.5%, whereby such percentage increase will be gradually implemented by 2013. Debt limit for short and long term borrowing set on 30% from municipal budget revenues in the previous year. New instrument for assistance and financing of municipalities was introduced in the form of short-term loan (with maturity at the end of the current fiscal year, in which it was approved) and long-term loan (up to five years) from the Budget of the Republic of Macedonia. Construction land, concessions for mineral raw materials and environmental fees. Possibility for the municipalities to appear on the capital market by issuing bonds.

21. “Making Difference” Projections Ministry of Finance200820092010201120122013 GDP growth5-0.90.73.54.55.5 GDP per capita in Euros3,2833,2553,3533,5683,8344,160 Industry2.4-10.8-25.26.47.5 Inflation - CPI8.3-0.81.6333 Trade deficit as a % of GDP-26.2-23.2-21.3-21.9-22.3-22.7 Current account deficit as a % of GDP-12.8-6.7-2.8 -3.8-4.3 FDI in million Euros400145221.4250380450 FDI as a % of GDP62.23.23.44.85.2 Budget deficit-0.9-2.7-2.5 -2.2-1.9 Central government debt as a % of GDP20.623.924.82626.125.5 Net wage real growth1.9251.413.25.2 Gross wage real growth0.415-0.612.53.8 Unemployment (ILO definition)33.532.430.9302928 Employment (change in %)3.23.41.3334

22. “Making Difference” Q & A Questions and Answers

23. “Making Difference” Thank you