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European Commission: Macedonia Has Third Highest GDP Growth in Europe

The Republic of Macedonia has noted the third highest growth of Gross Domestic Product (GDP) in Europe and, according to this year's projections, it is expected to be fourth on European level, the European Commission says in today's Spring economic forecast.

Macedonia's GDP has grown for 3.1%, which is slightly lower than Romania (3.5%) and Lithuania (3.3.%), while the EU has noted GDP growth of only 0.1%, the EU area was in recession (-0.4%), the US has a surplus of 1.9% and Japan 1.5%, MIA reports from Brussels.

This year forecasts predicted Macedonia's GDP to mark an increase of 3.0%, Latvia of 3.8%, Lithuania of 3.3% and Poland of 3.2%.

Real GDP growth is expected to advance with moderation in 2014, at 1.6% and 1.2% respectively in the eurozone, before gaining some further speed in 2015.

In contrast to the sharp but short lived upturn in 2010, the current recovery in the EU and Eurozone is more balanced regionally as it involves most of the vulnerable member-states.

Real GDP growth is expected to accelerate next year. Substantial, but receding, differences in performance will remain. Among the largest economies, Germany's increase of GDP is expected to decline, while Spain is expected to fully recover and slowly gather pace in France and Italy. UK's growth is gaining stability.

Siim Kallas, Commission Vice-President said: "The recovery has now taken hold. Deficits have declined, investment is rebounding and, importantly, the employment situation has started improving. Continued reform efforts by member-states and the EU itself are paying off. This ongoing structural change reminds me of the profound adjustment that the central and eastern European economies undertook in the 1990s and in subsequent years, linked to their joining the EU exactly 10 years ago. Their experience shows how important it is to embrace structural reforms early on and to stay on the course, whatever challenges may be faced along the way. In this spirit, we must not lessen our efforts to create more jobs for Europeans and strengthen growth potential."

A gradual pick-up in economic growth

Overall, domestic demand is expected to become the key driver of growth over the forecast horizon. Consumer spending should progressively add to growth as real income benefits from lower inflation and the stabilizing labor market. The recovery in investment should continue to support growth, with gains in both equipment and construction investment. The contribution of net exports is expected to diminish over the forecast horizon.

The gradual nature of this upturn is in line with previous recoveries, following deep financial crises. While financing conditions remain benign on average, substantial differences persist across member-states and across firms of different size.

Labor market conditions started to improve in the course of 2013 and more jobs, as well as a further decline in unemployment rates should follow (to 10.1% in the EU and 11.4% in the euro area in 2015).

Inflation is expected to remain low, both in the EU (1.0% in 2014, 1.5% in 2015) and in the euro area (0.8% and 1.2%).

Current account deficits in vulnerable member-states have been reduced in recent years, following continuous price competitiveness gains. In a number of these economies, surpluses are expected in 2014 and 2015.

The reduction in general government deficits is set to continue. In 2014, a decrease is projected to around 2½ % of GDP in both the EU and the euro area. The debt-to-GDP ratio will peak at almost 90% in the EU and 96% in the euro area before falling next year.

The largest downside risk to the growth outlook remains a renewed loss of confidence from a stalling of reforms. Also, uncertainty about the external environment has increased. On the other hand, further bold structural reforms could lead to a stronger-than-envisaged recovery.

While current price developments reflect both external factors and the ongoing adjustment process, a too prolonged period of low inflation could also entail risks. However, the gradually strengthening and increasingly broad-based recovery should mitigate these risks.

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