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TITLE:  MACEDONIA ECONOMIC POLICY AND TRADE PRACTICES
DATE:  FEBRUARY 1994
AUTHOR:  U.S. DEPARTMENT OF STATE

                            MACEDONIA*

    The former Yugoslav Republic of Macedonia proclaimed its
statehood in 1991.  Although recognized by several states
including China, by November 1993 it had not been recognized by
the United States.  The term "Macedonia" is used informally in
this report for convenience; its use is not intended to have
international, legal, or diplomatic significance.

    Macedonia's economy has suffered a severe shock on account
of the conflict in the former Yugoslavia, which has caused a
flood of refugees (now estimated at 15,000), a breakdown of
trade and capital flows, and the loss of infrastructure. 
Compliance with the UN sanctions against Serbia has improved
significantly since September 1993 at a severe cost to the
Macedonian economy.  The risk of a breakdown in Macedonian
sanctions enforcement remains a threat to the effectiveness of
the international sanctions regime.

    Macedonian GDP, which has suffered a 50 percent decline
from pre-war levels, dropped an additional 17 percent in 1993. 
Industrial production in 1993 fell by about 20 percent and only
about 40 percent of the country's industrial capacity was in
use at the year's end.  Official unemployment stood at
approximately 30 percent of the labor force.  Some 30 percent
of those nominally employed were additionally classified as
"surplus labor" and placed in a "forced vacation" status in
which they received minimal wages often several months
delayed.  The average monthly salary was $126 in September --
less than the cost of food for the average family -- but
substantially higher than the average monthly salary in
Serbia/Montenegro.

    Industry and mining are the largest sectors of the economy,
together contributing about 40 percent of GDP.  Agriculture
normally contributes about 15 percent of GDP, but a drought has
reduced 1993 harvests and increased consumer prices of
agricultural products.  Most of Macedonia's agricultural sector
is in private hands, while the industrial base is largely under
state control.  The existing private sector, which is small but
growing and service-oriented, has also suffered.  Retail sales
were down 45 percent in the first half of 1993 compared with
the same period in the previous year.  Tourism virtually
disappeared as a result of the Yugoslav conflict.  The
transport sector, which is heavily geared toward north-south
transit from Greece to Serbia, was severely disrupted.



*   Macedonia has proclaimed independent statehood but has not
    been formally recognized by the United States as a state. 
    There has been a dispute regarding the name under which it
    should be recognized.  We use "Macedonia" in this report
    informally for convenience; its use is not intended to
    have international or diplomatic significance.


    In spite of a harsh economic climate, the Macedonian
government has taken steps to transform its centrally planned
economy to a market-based economy.  Inflation, which exceeded
1,600 percent in 1992, dropped to single figures for the first
nine months of 1993 before rising to a monthly rate of 12
percent in October 1993.  In June, the Macedonian government
adopted a privatization law.  Reacting to the worsening
economic situation, Macedonia also imposed restrictions on the
amount of foreign currency leaving the country.  In October,
the government created a Steering Committee for the Agency for
Economic Transformation, which will oversee the privatization
of over 400 Macedonian companies.  Macedonia is a member of the
IMF and hopes to receive a substantial influx of development
assistance from the international financial institutions after
clearing arrears to the World Bank, which it inherited from the
former Yugoslavia.

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