Grey economy in North Macedonia costs hundreds of millions of euros annually

Grey economic activity in North Macedonia siphons off hundreds of millions of euros each year, even as official figures record a drop in unemployment. Analyses and union calculations point to rising informal employment, undeclared wages and widespread avoidance of public levies as the main channels of loss.

According to the State Statistical Office, unemployment fell by 6.6 percent in 2025 compared with 2024, while the number of employed rose by 1.5 percent. At the same time, the share of informal employment has increased: there were 94,847 informally employed workers in 2025, an 11.5 percent rise year‑on‑year. The majority work in agriculture, forestry and fishing, and in construction.

“When workers are not registered or salaries are reported as lower than they actually are, the state is deprived of significant revenues from taxes and contributions. At the same time, workers lose entitlement to social security, pension years and health care,” the Union of Trade Unions of Macedonia (SSM) notes in its analysis.

Potential fiscal gains from formalisation

In a scenario published in the SSM trade paper Trudbenik, registering more than 100,000 informal workers at the minimum wage would generate an illustrative annual effect of around €245 million. Using the average wage as the base increases that potential to roughly €448 million a year. The union stresses these calculations are illustrative and would not translate automatically into direct budget revenues, but they underline the scale of funds lost to informality.

SSM also highlights wage structure problems: about 73 percent of formally employed workers receive wages below the national average, and nearly every second worker has a monthly income of up to €600. The union argues that a higher minimum wage should be viewed not only as a cost to employers but also as a tool to reduce informality, increase fund contributions and improve living standards.

Research by Finance Think shows the grey economy remains deeply embedded. Their estimate put the informal sector at 23.2 percent of GDP in 2020. Analysts point to low tax morale, distrust in institutions, corruption and inefficient administration as root causes. Other assessments cited in public debate argue the grey economy may exceed 30 percent of GDP, illustrating how large the fiscal and social impact can be.

The government announced strengthened measures in February this year to curb the informal sector. Prime Minister Hristijan Mickoski set a target to reduce the informal economy from 28.9 percent to 26 percent of GDP by the end of 2027.

The labour market shows a paradox: an active population of 796,399 people in 2025 included 704,617 employed and 91,782 unemployed. Activity and employment rates stood at 52.5 percent and 46.4 percent respectively, with an unemployment rate of 11.5 percent. Of the unemployed, 61.4 percent were men; among the employed, 57.6 percent were men. In June, active jobseekers numbered 88,541, while over 41,000 were recorded as passive jobseekers. Nearly 62 percent of surveyed employers reported a need to hire new staff. Open vacancies exceeded 10,000, and more than 10,000 work‑permit requests for foreign workers were processed over the year.

Economists and tax experts say tackling informality requires firmer inspections, faster formalisation of jobs, higher declared wages and consistent law enforcement to protect public revenues, pension sustainability and workers' rights.

Photo: press material from the event