Causes and Effects of The Informal Economy – The Case of Macedonia

Republic of Macedonia (RM) has high level of informal economy activity. It accounts for about 35- 40% of GDP. It has a direct influence to the main indicators, categories and instruments for macroeconomic planning and regulation. By using qualitative, descriptive, statistic and comparative methodologies, this research attempts to locate causes and consequences of informal economy in RM. It also presents different ways for measurement of the size of informal economy and understands the basic characteristics of the Macedonian case in order to present well‐grounded policy recommendations. The main finding of the paper is that the informal economy in The RM is a multifaceted phenomenon and the most efficient manner to remove the causes for the occurrence and presence of the informal economy is the improvement of the institutional frame in the country. There is a need for directly focused Government measures that would precipitate the integration of the informal economy in the formal sector, once the right conditions are put in place. The main recommendation that this paper promotes is directed towards activi ties and measures of the authorities for removing the reasons of informal economy appearance. Another recommendation is for the Government to increase the speed for redefining its role on the market. There is a need for widening the awareness of all busine ss players for the necessity of playing by the rules as well as for enforcing the institutional framework, legal order, moral values and the motivators of the countr y‘s functional economy

Lessons from world economic crises: cleaning, remodeling and harmonizing the economy

Every bigger economic crisis, as the current one, leaves behind a huge material damage to the world economy, and to separate national economies as well. However, every such crises reminds national authorities of the mistakes done in the past while creating and running macroeconomic policy and teaches them how they should overcome them in the upcoming period. That is the positive part of the crises: it should be understood as a good teacher who gives lessons based on which an ambient for a lasting and sustainable growth in future should be created. From the current economic crises we’ve learned that it worked as a purgatory: the weak and fragile companies fell down; the more resistant ones took the chance and became even stronger; new companies emerged which create optimism and faith in an upcoming sustainable course towards the expansive path of the economic cycle. The crisis reshapes the world economic map. Market forces are not in the same geographical borders as before. Spheres of interest are not the same as before. Competition on world markets gets new forms and players. The authorities of most of the countries became aware that they should remodel the domestic economy, if they wanted a better position in the incoming distribution of world markets. Finally, the crisis showed that a stabile economic growth may not be expected in future, either locally or globally, without appropriate harmonization of the basic instruments of macroeconomic policy: fiscal policy, monetary policy and foreign trade policy. Has Republic of Macedonia learned those lessons? How can its economy shift into a lasting and sustainable economic growth in the upcoming period? The simple and, at the same time, very complex answer would be: by remodeling its economy

The impact on the banking system from the accession of Macedonia in the EU

The aim of this paper is to examine the impact on the banking system from the accession of Macedonia in the EU. EU enlargement is a complex process with enormous impact on the economy of the new member countries. The financial system of the new member country, and the banking system as a part of it, faces with the challenge of integration in the EU financial system. The best evidence of the EU accession impact on the banking system is the analysis of the basic characteristics of banking systems on the countries that became members in the last 20 years. The future banking development in new EU member countries will very likely follow some main patterns known from the old EU members. In a way banks from candidate countries can see their own future by observing the current developments in Western European banking. The process of restructuring in the banking system through consolidation which lead to increased concentration was one of the main drivers of changes. The existence of this process in new EU countries will be examined together with the structure of Macedonian banking system. It is important to examine whether significant efficiency improvements were achieved in the banking systems of the new EU countries and are they result from the bigger market power or some other factor. Also, there were changes in the funding sources of the banks from the new EU countries with a lot of potentials for alternative funding possibilities. The financial crises made these potentials to evaporate, but on long term horizon, those opportunities will appear again. The low level of financial intermediation in new EU countries leaves space for increasing the range of financial services and their scope. Associated with the previous, a further enlarge of the market share on non-bank financial intermediaries in new EU members can be expected

EMU crisis creates regional groupings: are Balkan countries challenged by that?

Together with the IMF and the World Bank, the EMU is the biggest monetary project in the history of mankind. Its goals are reduction of trade costs between its member-states, increase in the convergence in their relations and their economic growth. The main pillars of the monetary institutions were set up for its normal operation. However, the member-countries kept their fiscal sovereignty. The EMU was not a part of a larger political integration of the member-countries. It enabled them to make political decisions on a national level which were not in line with the so-called Maastricht criteria. The outcome of the lack of a political union is: growing budget deficits and continuing growth of the public debt of most of the member-states of the EMU. A debt crisis was created which shakes the basis not only of the EMU but also of the EU. For the first time in its six and a half decade existence, the EU faces an existential crisis. The exit of this condition lies in redesigning of the basic structures on which it stands. This process might be fatal, as well as painful for the EU. In such situation, the Balkan aspiring member-states will have to wait longer to enter the union. In the meantime, to protect their national economic and political tissue, as well as to prepare for the accession in the EU, a regional cooperation and union is a necessity. A Balkan Economic Union in which Serbia, Bosnia and Herzegovina, Albania, Kosovo, Montenegro, Turkey and Macedonia will be a part will help in achieving the goal of entering the EU less painfully, and the Balkan, at last to stop being the “gunpowder barrel”. With application of a quality, historic, comparative and descriptive method, this paper presents the possibilities and opportunities of this model of designing a political and economic picture of the Balkan. The aim of this paper is to show that with such a union, the Balkan countries have a serious chance to overcome, still, the prevalent antagonisms and thus clear the way to their final destination – the EU

Facing the crisis and implementing sustainable growth of Macedonian economy by developing small and medium enterprises

The positive and negative experiences of the World Economic Crisis should be used for recomposing the world’s economic map. For many countries it is a sign for changing the economic model if the country wants to keep up with the new world trends. Republic of Macedonia is one of those countries. The inherited conditions and the required development of the economy suggest the need to introduce a so called holistic approach in the creation of the future economic model. In its basis, this model deals with the macroeconomic and financial politics as well as with the process of creating new jobs. The main drivers of that model should be small and medium enterprises (SMEs). The research will show why and how SME’s should become spine of the future sustainable economic development. The expected results of implementation of such model are increase of the number of employees, export and country’s GDP

EMU crisis creates regional groupings: are Balkan countries challenged by that?

Together with the IMF and the World Bank, the EMU is the biggest monetary project in the history of mankind. Its goals are reduction of trade costs between its member-states, increase in the convergence in their relations and their economic growth. The main pillars of the monetary institutions were set up for its normal operation. However, the member-countries kept their fiscal sovereignty. The EMU was not a part of a larger political integration of the member-countries. It enabled them to make political decisions on a national level which were not in line with the so-called Maastricht criteria. The outcome of the lack of a political union is: growing budget deficits and continuing growth of the public debt of most of the member-states of the EMU. A debt crisis was created which shakes the basis not only of the EMU but also of the EU. For the first time in its six and a half decade existence, the EU faces an existential crisis. The exit of this condition lies in redesigning of the basic structures on which it stands. This process might be fatal, as well as painful for the EU. In such situation, the Balkan aspiring member-states will have to wait longer to enter the union. In the meantime, to protect their national economic and political tissue, as well as to prepare for the accession in the EU, a regional cooperation and union is a necessity. A Balkan Economic Union in which Serbia, Bosnia and Herzegovina, Albania, Kosovo, Montenegro, Turkey and Macedonia will be a part will help in achieving the goal of entering the EU less painfully, and the Balkan, at last to stop being the “gunpowder barrel”. With application of a quality, historic, comparative and descriptive method, this paper presents the possibilities and opportunities of this model of designing a political and economic picture of the Balkan. The aim of this paper is to show that with such a union, the Balkan countries have a serious chance to overcome, still, the prevalent antagonisms and thus clear the way to their final destination – the EU

Lessons from world economic crises: cleaning, remodeling and harmonizing the economy

Every bigger economic crisis, as the current one, leaves behind a huge material damage to the world economy, and to separate national economies as well. However, every such crises reminds national authorities of the mistakes done in the past while creating and running macroeconomic policy and teaches them how they should overcome them in the upcoming period. That is the positive part of the crises: it should be understood as a good teacher who gives lessons based on which an ambient for a lasting and sustainable growth in future should be created. From the current economic crises we’ve learned that it worked as a purgatory: the weak and fragile companies fell down; the more resistant ones took the chance and became even stronger; new companies emerged which create optimism and faith in an upcoming sustainable course towards the expansive path of the economic cycle. The crisis reshapes the world economic map. Market forces are not in the same geographical borders as before. Spheres of interest are not the same as before. Competition on world markets gets new forms and players. The authorities of most of the countries became aware that they should remodel the domestic economy, if they wanted a better position in the incoming distribution of world markets. Finally, the crisis showed that a stabile economic growth may not be expected in future, either locally or globally, without appropriate harmonization of the basic instruments of macroeconomic policy: fiscal policy, monetary policy and foreign trade policy. Has Republic of Macedonia learned those lessons? How can its economy shift into a lasting and sustainable economic growth in the upcoming period? The simple and, at the same time, very complex answer would be: by remodeling its economy

Facing the crisis and implementing sustainable growth of Macedonian economy by developing small and medium enterprises

The positive and negative experiences of the World Economic Crisis should be used for recomposing the world’s economic map. For many countries it is a sign for changing the economic model if the country wants to keep up with the new world trends. Republic of Macedonia is one of those countries. The inherited conditions and the required development of the economy suggest the need to introduce a so called holistic approach in the creation of the future economic model. In its basis, this model deals with the macroeconomic and financial politics as well as with the process of creating new jobs. The main drivers of that model should be small and medium enterprises (SMEs). The research will show why and how SME’s should become spine of the future sustainable economic development. The expected results of implementation of such model are increase of the number of employees, export and country’s GDP

Competitiveness of the European Union: Pre-crisis Trends and Impact of the Financial Crisis

This paper has the aim to point out the risks of reducing the EU competitiveness by analyzing the indicators of price and cost competitiveness, as well as the structural and technological aspects of competitiveness. The influence of the world crisis on the competitiveness and export performances of the EU is in the focus in order to show at what extent the global downturn may have aggravated previously existing needs for readjustment of the functioning of the Union. Not only that the crisis showed that the problems in the Union were not created recently, but also it demanded urgent needs of new improved policy in order to regain the competitiveness strength and performances. The reformulated strategy needs to be based on openness and innovation, with investment in research and development. Long-term expectations are to be made comprehensive structural changes in order to overcome structural differences between individual Member States and to increase the overall competitiveness. Additionally, trade barriers are needed between individual Member States to be removed and higher individual and aggregate rates of economic growth are to be achieved. It is clear that the effects of deep integration of the EU has not yet been achieved, and expected benefits may not be realized, if internal and external balance of the Union is not maintained

Macroeconomic aspects of the grey economy - the case of Macedonia

Compared regionally, Republic of Macedonia has one of the highest levels of grey economy activity. According to some estimations, it accounts for about 40% of GDP. This high level of grey economy has a direct influence to the main economic indicators, categories and instruments for macroeconomic regulation: GDP value cannot be precisely measured, there are problems in formulating and realization of macroeconomic policy instruments (fiscal policy, monetary policy, social policy, foreign-trade policy), etc. Because of its high value, grey economy is challenging and serious danger for macroeconomic planning and regulation. By using qualitative, descriptive, statistic and comparative methodologies, this research attempts to locate causes, consequences and the scope of grey economy in Republic of Macedonia. It also presents different ways for measurement of the size of grey economy in the Republic of Macedonia and understands the basic characteristics of the Macedonian case in order to present well‐grounded policy recommendations. The main finding (conclusion) of the paper is the fact that the grey economy in The Republic of Macedonia is a multifaceted phenomenon and the most efficient manner to remove the causes for the occurrence and presence of the grey economy is the improvement of the institutional frame in the country. There is a need for directly focused Government measures that would precipitate the integration of the grey economy in the formal sector, once the right conditions are put in place. The recommendations that this paper promotes will head exactly in that direction. The main recommendation is directed towards activities and measures of the authorities for preventing and removing the reasons of grey economy appearance and punishment of the consequences of this national economy “evil”. Another recommendation is for the Government to increase the speed for redefining (changing) its role on the market. Although there are noticeable signs that the situation has been changing, there is a need for widening the awareness of all business players for the necessity of playing by the rules as well as for enforcing the institutional framework, legal order, moral values and the motivators of the country’s functional economy