Macedonia must boost productivity to catch up with EU - World Bank

By Daria Sito-Sucic

SARAJEVO (Reuters) - Macedonia, which hopes to soon unlock its stalled bids for European Union and NATO membership, should boost productivity and reduce fiscal risks to start catching up with EU economic standards, a World Bank report said on Thursday.

Skopje's deal with Athens to change the country's name to the Republic of North Macedonia is likely to speed up its Euro-Atlantic integration. Parliament is expected to pass constitutional changes and officially adopt the new name by the end of January at the latest.

Macedonia is a Western Balkans leader when it comes to market-oriented reforms so is well positioned to seize the opportunities that EU accession can bring, the World Bank said in its latest Macedonia country report.

It should exploit its strategic location, openness to trade and prudent macro-economic management to boost growth and reduce high unemployment, the report said.

"Increasing the productivity of the economy, enhancing job opportunities for all, and achieving fiscal, social, and environmental sustainability would allow Macedonia to maximize the benefits from EU integration," said Linda Van Gelder, World Bank Regional Director for the Western Balkans.

Macedonia needs to foster a more dynamic and competitive private sector that creates more jobs, invest in people to build an adaptive labour force and push for more effective governance, the bank's report said.

Most jobs are now in low-productivity sectors and too many firms are small and uncompetitive. Only 50 percent of working-age Macedonians are employed, and low birth rates and emigration are shrinking the workforce, according to the report.

A lack of skills also hindered productivity, and 70 percent of Macedonian 15-year-olds fell short of basic reading and numerally proficiency.

Macedonia also must address fiscal risks since a lack of adequate fiscal discipline over the past decade had led to the doubling of public debt, with the pensions deficit now over 4 percent of GDP and the accumulation of public sector arrears threatening fiscal sustainability.

(Reporting by Daria Sito-Sucic; Editing by Mark Heinrich)