Fitch reaffirms North Macedonia's BB+ rating with stable outlook

Fitch Ratings has reaffirmed North Macedonia's long-term foreign- and local-currency issuer default rating at BB+ with a stable outlook, citing supportive governance indicators, a higher GDP per capita versus peers and a consistent monetary policy that effectively preserves the de facto fixed exchange rate of the denar to the euro.

Фискални слабости и краткорочни ризици

The agency pointed to the government's commitment to EU accession reforms as a positive factor, but listed the country’s small economy size, elevated public debt and the current account deficit as the main constraints on the rating.

Fitch estimates the budget deficit will reach 4 percent of GDP in 2026, declining gradually to 3.6 percent by 2028. The government has revised its own 2026 deficit target from 3.5 to 4.1 percent because of higher public-sector wages, agricultural subsidies and capital investment. Capital spending in January–July rose 40 percent year‑on‑year, mainly driven by works on motorway corridors 8 and 10d.

The full implementation of the Budget Law has been postponed for a third time, now to 2028, amid high current and capital needs and limited progress on technical preparations. The law envisages a deficit cap of 3 percent and a public-debt ceiling of 60 percent of GDP.

Public debt stood at 51.6 percent of GDP at end‑2025, and is projected to stabilise at an average of 52.7 percent in 2026–2028. Most new borrowing is expected to be external, through eurobonds and syndicated loans. Around 62 percent of the stock of debt is denominated in foreign currency, mainly euros, and 76 percent carries fixed interest rates.

State guarantees are an additional fiscal risk and amounted to 6.8 percent of GDP in the first half of the year; 4.1 percent of GDP of those guarantees relate to the Public Enterprise for State Roads. Following legal changes in June, the enterprise must finance the corridor works independently and will therefore be heavily reliant on new loans backed by state guarantees. Overdue liabilities of state-owned enterprises total 3.8 percent of GDP.

Economic growth is projected at 3.2 percent in 2026 after a pick‑up to 4.3 percent in the second quarter, supported by construction and industry. Public investment and private consumption are the main growth drivers, while net exports make a negative contribution because of weak demand in the EU. Average inflation in January–August was 3.7 percent, driven by energy price increases caused by the war in the Middle East; Fitch expects average inflation of 4 percent in 2026–2028, supported by wage growth and rising credit activity.

The current-account deficit is expected to reach 5.5 percent of GDP for the year due to expensive energy imports and imports of investment goods. External borrowing should keep foreign-exchange reserves sufficient to cover 3.9 months of imports, and liquidity will be supported by a European Central Bank repo line worth €50 billion, which starts in October.

Photo: press material from the event